Tesla is evaluating lithium refinery in Texas for electric car batteries

Elon Musk has previously suggested that Tesla may enter lithium refining at scale because the cost of the metal, a key component in manufacturing batteries, has risen. If Tesla’s Texas application is approved, construction could begin on a lithium hydroxide refining facility in the fourth quarter of 2022.

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Electric car giant Tesla is evaluating the feasibility of a lithium hydroxide refining facility on Texas’ gulf coast.

Tesla said the plant is dedicated to developing “battery-grade lithium hydroxide” and will be “the first of its kind in North America,” according to a newly released letter to the Texas Comptroller’s Office.

The company will process the “raw ore material into a usable state for battery production” then ship the lithium hydroxide to Tesla’s various battery manufacturing factories, the application said.

In April, Tesla CEO Elon Musk said the company may have to get into lithium refining because the price of the metal “has gone to crazy levels.”

The price of lithium has risen 120% this year, according to a tracking index from Benchmark Mineral Intelligence.

Tesla’s move is likely a bid to diversify its lithium supply and battery production. China controls more than half of the world’s lithium processing and refining, and the United States only 1%.

As part of the Texas application, the company said it is also considering “other battery materials processing, refining and manufacturing and ancillary manufacturing operations in support of Tesla’s sustainable product line.”

If Tesla’s application is approved, construction could begin in the fourth quarter of 2022, the company said. The project will reach “commercial operation” in the fourth quarter of 2024.

Tesla said that it is “still evaluating the feasibility of this project” and that “initial development activities have only begun.”

No engineering, construction or procurement contracts have been negotiated or signed and no regulatory permits have been obtained, Tesla said.

Musk’s firm said the project could be located “anywhere with access to the Gulf Coast shipping channel.” Tesla said it was evaluating a competing site in Louisiana.

Tesla says the only way this project will be viable is if Texas gives it tax breaks under its law.

“In the case of investing in this proposed project in Texas, the decision will be based on a number of commercial and financial considerations, including the ability to obtain relief regarding local property taxes,” according to the application .

Lithium is a critical metal for batteries that go into everything from electric cars to smartphones. Given the strategic importance of such rare earth metals and China’s mining of them, there has been concern from Washington that Beijing could cut off critical supplies of lithium and other materials.

The US is trying to boost its own rare earth refining and mining industry to catch up with China.

Here is the letter: