Elon Musk, the CEO of Tesla Inc. (TSLA.O), has put his young firm on an aggressive expansion route that no other automobile executive has ever imagined.
However, this path is full of potholes and other obstacles that could delay or derail the voyage.
The company’s growth promises for shareholders and its commitment to promoting the use of renewable energy are both centred on Musk’s grandiose aim of selling 20 million electric vehicles by 2030.
If successful, Tesla would double the size of any carmaker in history and control around 20% of the world’s auto market.
According to an analysis of Tesla’s financial records and forecasts for global electrical vehicles, demand, EV battery as well as battery mineral production, such exponential growth—a 13-fold increase over the estimated 1.5 million vehicles it intends to sell this year—is believed to come at an unprecedented rate of hundreds of billions of dollars.
Manufacturing specialist Michael Tracy of The Agile Group compared this to the massive American attempt to develop an atomic bomb during World War Two, the Manhattan Project.
The Texas-based 19-year-old automaker faces enormous obstacles as a result of Musk’s vision, not the least of which is finding enough batteries and other raw materials like lithium and nickel to produce 20 million vehicles.
Tesla has been a disruptor, but if it succeeds in this next stage of expansion, it will go beyond disruption to fundamentally alter both the mining and trading of battery materials as well as the entire global auto industry.
Tesla would need to construct seven to eight additional “gigafactories” along the way—roughly one every 12 months—to overtake every rival, gain market share, and grow into a business the size of Volkswagen AG (VOWG p.DE) plus Toyota Motor Corp (7203.T) altogether. To serve all of its vehicle plants, it would also require a battery capacity that is nearly 30 times greater.
The cost will be high: during the next eight years, Tesla might invest up to $400 billion in the construction of new car assembly plus battery plants throughout the world, and an additional $200 billion, including the cost of raw materials, in the manufacture or purchase of batteries.
Governments from Canada, Indonesia, India, and other nations are already putting pressure on Tesla to make its next commitment in EV production, which Musk has predicted might happen by the end of the year.
Tesla would need to increase the capacity of its own battery manufacturing facility as well as the facility of its battery partnerships and the raw material suppliers who supply them to produce 20 million vehicles annually.
Musk stated that it is anticipated to produce somewhere in the range of 3,000-gigawatt hours as well as 3 terawatt hours annually in the long run. He is very convinced that they will succeed by 2030, but he believes they have a reasonable probability of doing so even before then.
Tesla can currently produce 100 gigawatt-hours of batteries.
To sustain the manufacture of 3.0 terawatt-hours of batteries in 2030, according to Benchmark Mineral Intelligence, which monitors the worldwide EV battery market, Tesla will need 2.0 million tonnes of lithium, 1.3 million tonnes of nickel, 0.2 million tonnes of cobalt, and 3.5 million tonnes of graphite.
That amounts to four times as much lithium, nickel, cobalt, and graphite as what the entire EV industry is anticipated to use in 2022.
The 2030 expectations are “very aggressive,” according to Benchmark.
A thorough request for comment received no response from Tesla.
Former Tesla officials revealed that the automaker, which seldom discloses its supplier links, started negotiating offtake arrangements with miners & refiners more than ten years ago and presently has partnerships with more than 20 materials suppliers worldwide.
Analysts say that there is currently no raw material capacity to sustain Tesla’s planned manufacturing in 2030.