Tesla Inc is turning to Mozambique for a key component in its electric vehicle batteries in what analysts believe is a first-of-its-kind deal designed to reduce its dependence on China for graphite.
Elon Musk’s company signed an agreement last month with Australia’s Syrah Resources Ltd, which operates one of the world’s largest graphite mines in the southern African country.
It is a unique partnership between an electric vehicle manufacturer and a producer of the mineral that is critical for lithium-ion batteries. The value of the deal has not been released.
Tesla is to buy the material from the company’s processing plant in Vidalia, Louisiana, which sources graphite from its mine in Balama, Mozambique.
The Austin, Texas-based electric automaker plans to buy up 80 percent of what the plant produces — 8,000 tonnes of graphite per year — starting in 2025, the agreement says.
Syrah must prove the material meets Tesla’s standards.
The deal is part of Tesla’s plan to ramp up its capacity to make its own batteries so that it can reduce its dependence on China, which dominates global graphite markets, said Simon Moores of UK-based battery materials data and intelligence provider Benchmark Mineral Intelligence.
“It starts at the top with geopolitics,” Moores said. “The US wants to build enough capacity domestically to be able to build [lithium-ion batteries] within the USA. And this deal will permit Tesla to source graphite independent from China.”
Moores said producing the batteries in the US would reduce some of the questions Tesla is facing about its ties to China, where there are environmental concerns at some mines.
The automaker also has set up a showroom in Xinjiang region, where Chinese officials are accused of forced labor and other human rights abuses against mostly Muslim ethnic minorities.
The battery industry has been confronted with a short supply of graphite in the past few months, Moores said.
Graphite stores lithium inside a battery until it is needed to generate electricity by splitting into charged ions and electrons.
The deal comes as every major automaker is racing to get into electric vehicles amid concerns about climate change.
Tesla is making almost 1 million electric vehicles per year and sourcing enough batteries is its biggest constraint, he said.
“They’ve upped their own battery manufacturing capacity,” Moores said, but still “they can’t get enough batteries.”
A new battery factory that the company is building in its new hometown of Austin, Texas, would allow it to get closer to self-sufficiency, but Moores said it is still buying batteries from other manufacturers, “and that won’t change this decade.”
For instance, Tesla has a deal with Panasonic Corp to make battery cells at the automaker’s battery factory near Reno, Nevada.
The deal also brings the graphite processed in Louisiana much closer to Tesla’s US factories.
“The [COVID-19] pandemic pointed out to us that we’ve got these long, long, long supply chains, and it doesn’t take much to disrupt a supply chain,” said Donald Sadoway, a professor of materials chemistry at the Massachusetts Institute of Technology. “Somebody could all of the sudden say: ‘We’re going to jack up the prices,’ or ‘We’re going to refuse to ship it.’”
For the Australian mining firm, the deal is “crucial” because it has a non-Chinese purchaser for its graphite product, Moores said.
Syrah’s graphite mine in Mozambique’s northernmost province, Cabo Delgado, is one of the world’s largest, with an ability to produce 350,000 tonnes of flake graphite a year.
Cabo Delgado has faced violence in the past few years by Islamic extremists, an insurgency that has extended inland from coastal areas toward the neighboring Niassa Province.
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