Elon Musk’s electric car brand Tesla has reportedly secured a major deal to get battery resources outside of China.
According to ABC News, Tesla is now teaming up with Mozambique for its electric battery component. The media outlet reports that analysts now believe this is a first-of-its-kind deal that is looking to reduce the car company’s dependence on China for graphite.
Tesla notably signed an agreement in December with Australia’s Syrah Resources, which reportedly operates one of the world’s largest graphite mines in the southern African country. The partnership is notably critical for lithium-ion batteries. The deal’s value has not been revealed.
As part of the deal, Tesla will purchase the material from the company’s processing plant, which is located in Vidalia, Louisiana. The platform sources graphite from its mine in Balama, Mozambique. Musk’s car brand is planning to also purchase up to 80% of what the Louisiana plant produces. Which is 8,000 tons of graphite per year. The agreement reveals that this part of the deal will start in 2025. However, Syrah must prove that the material is meeting the car brand’s standards.
Tesla Looks to Reduce Its Dependence on China
Meanwhile, ABC News reports Tesla’s new deal is part of its plan to make its own batteries. The move will also further help the company reduce its dependence on China.
Simon Moores of UK-based battery materials data and intelligence provider, Benchmark Mineral Intelligence, also spoke about the collaboration. “It starts at the top with geopolitics. The U.S. 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 further explains that Tesla producing batteries in the U.S. will reduce some questions about the brand’s ties to China. Although it is making almost a million electric cars per year, Tesla can’t get enough batteries to operate the vehicles. The deal brings the graphite processed in Louisiana much closer to the car brand’s U.S. factories.
Speaking about current supply chain issues, Donald Sadoway, a professor of material chemistry at the Massachusetts Institute of Technology (MIT), states, “The 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. Somebody could all of a sudden say, ‘We’re going to jack up the prices.’ Or ‘We’re going to refund to ship it.’”
However, there is a major drawback with the car brand moving away from China. ABC News went on to add that China is considered Tesla’s biggest global market. The car company reportedly has a major factory near Shanghai. It also sells about 450,000 vehicles in China. This is compared with the nearly 350,000 vehicles being sold in the U.S.