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Page 1: Tesla motors plans $5-billion Gigafactory

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What will Tesla Motors' Gigafactory mean for

higher tech metal demand?

Tesla Motors makes the world’s most advanced electric cars run on electric

batteries. Tesla CEO Elon Musk wants to manufacture those batteries in America

and is planning to launch a $5-billion project named the "Gigafactory." Musk’s

dream project could be completely operational by 2020, prompting the requisite for

battery-grade materials like graphite and lithium. Japan’s Panasonic will be the

majority investor in the Gigafactory.

Tech metal investors should keep an eye on the news, because this one plant would

essentially double the world's output of electric vehicle (EV) batteries. That's

500,000 batteries a year at capacity. The idea is to drive down the cost of EV

batteries by 30% or more. Tesla is focusing on the supply chain to build the lowest-

cost batteries possible. If it can make the cost of its cars much cheaper, it should

spark mass uptake of electric vehicles. It's a plan to turn the world electric, in a

sense.

This increase in battery output will require a significant amount of raw materials

needed to build its batteries. Tesla plans to be producing about 1,000 electric cars a

week by the end of 2014 at its Fremont Factory, up from about 600 a week. By 2020,

the future Gigafactory is expected to produce enough batteries for 500,000 Tesla

electric cars a year, which is the approximate capacity limit of the Fremont Factory.

Electric cars will increase the demand for technology metals significantly. The cars

are generally powered through “the grid” but increasingly through solar arrays

locally. These use silver and a mix of other technology metals in their chemistry.

They use lithium ion batteries in general and the net weight of lithium used per

battery is higher in electric cars. For instance, the battery pack of a Nissan Leaf

weighs about 300kg while the Tesla S’ weighs about 340kg. In the operation, tech

metals are used in electric motors and regenerative breaking. The recovery of tech

metals from electric cars remains a big issue. Recycling of lithium is simple but there

is no infrastructure in place yet.

Page 2: Tesla motors plans $5-billion Gigafactory

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Graphite, lithium and cobalt are the main raw materials for EV batteries. Demand

for materials such as cobalt, lithium, aluminum and copper will surely be impacted

by the unparalleled scale of Tesla’s GigaFactory. Tesla builds a plant to produce EV

batteries in the U.S. while others already exist in Asia. The commercial battery

industry is really an Asian one, centered on Japan and South Korea. The startup of

Telsa’s battery plant is expected in 2017, and then it would reach capacity in 2020.

It is projected that, such a plant is definitely going to have an impact on the graphite

industry. Graphite, both natural and synthetic, is used as the cathode in a battery.

The Gigafactory will create greater competition for the world's graphite and

ultimately result in higher graphite prices. If Tesla chooses to use natural

flake graphite, the demand for battery-grade material could go up 154%. If the

supply of the right quality material isn't there, supply squeezes and price

spikes are so obvious.

It is estimated the global demand for cobalt alone from the Tesla Gigafactory will

increase by 20%. The metal is also used as a cathode material in lithium-ion

batteries. Tesla envisages the production of enough rechargeable lithium-ion

batteries each year by 2020 to power 500,000 Tesla vehicles. Lithium, the second

largest input mineral by volume, will see demand increase by 25,000 tonnes a year

from a Gigafactory at capacity. Mined as a mineral and processed into a chemical,

lithium is used as the cathode material in both hydroxide and carbonate form.

The prices of technology metals vary due to rises and falls in the demand. If

investors know when a price is about to snap, then that is one way to make money.

The investor should be monitoring these trends to have strong knowledge of what

has happened in the past because, generally, that is what will happen again in the

future.

About Electio Middle East

Electio Middle East is an international commodity brokerage focusing primarily on

Technology Metals. Electio is the largest brokerage in its sector and the first

company worldwide to offer a niche investment platform enabling judicious

investors to diversify their portfolios into the Tech Metals Sector.


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