While lithium is on high demand and prices on an upward trajectory, would Gigafactories not going to worsen the market conditions.
Gigafactories will require more lithium and can also command low costs due to its scale and can kick out smaller producers.
Tesla Gigafactories would disrupt lithium production dynamics in positive ways and will reduce the battery costs further.
There is an expectation of a huge capacity build-up for rechargeable batteries over the next ten year. Such developments would have a multidimensional impact on both lithium and lithium-ion batteries markets.
Looking at the announced plans, capacity will jump from around 60 GWh in 2016 to 260 GWh by 2020.
Tesla, BYD, Foxconn, Optimum Nano, China Aviation Boston Power, LG will be some prominent player to boost the supply chain.
This should send lithium demand to a new level by 2020 and beyond. However, given the economy of scale of these Gigafactories, lithium-ion battery costs are expected to decline significantly without any incentive of significant technological advances by around $100-200/kWh.
Tesla’s ‘Gigafactory’ is expected to produce its batteries at the cost of around $100/kWh by 2020. The factory is in partnership with Panasonic. General Motors’s Chevrolet in partnership with LG Chem is aiming to bring the lithium-ion battery up to $120/kWh by 2020.
Other automakers are also expected to follow and bring the battery cost down.
Currently, lithium is around 2-3% of the total lithium battery cost, which is expected to reduce further. In the worst-case scenario where lithium prices go up significantly, should not have any notable impact on the supply chain.