Tesla has released some of the details of its strategy to obtain the metals that are part of the batteries of their electric cars without the need to resort to suppliers or intermediaries. The manufacturer focuses on achieving the most of the lithium, nickel and cobalt straight from the mines from where they are extracted, thus ensuring the supply, the quality of the product and the social ethics of its raw materials.
Cobalt, lithium and nickel are raw materials that are produced using different mining methods around the world. These minerals are often concentrated in countries facing socioeconomic and environmental challenges. As world reserves are depleted they are becoming scarcer. So to meet global demand, companies are looking to access these resources in increasingly remote and challenging locations.
Cobalt, lithium and nickel are also classified as critical minerals by the governments of the United States, the European Union, and Canada because they are essential to enable the transition from fossil fuels to a low-carbon economy. As a result, the impact of mining activity on the environment and local communities lends itself to greater environmental and social scrutiny by civil society, politicians and investors.
The supply of the main materials that make up the batteries of electric vehicles is one of the biggest concerns of manufacturers today. The usual approach focuses on going to suppliers who in turn negotiate with third-party companies that make up a supply chain that can be complex, raise prices and lower product quality.
Tesla has preferred to get out of the mainstream and has opted for an approach based on direct relationship with mining companies that extract the most critical materials. In this way it secures supply and can monitor product quality that it acquires under the prism of social responsibility.
In the 2022 Environmental Impact Report, The Californian manufacturer explains that cobalt, nickel and lithium go through multiple processes by different companies that make up the supply chain. Some of the most important environmental and social risks in this chain are present in the mines themselves. “Direct sourcing from mining companies allows Tesla to participate directly in local contexts instead of having to rely on various intermediary companies that typically sit between electric vehicle manufacturers and mining.” On the other hand, the result is a more transparent and traceablewhich translates into better environmental and social data.
The manufacturer detailed some of the figures related to obtaining these raw materials. Obtained directly from mining companies more than 95% lithium hydroxide, 50% cobalt and more than 30% nickel it uses in its high energy density cells (NCA and NCM) in 2021. The rest comes from agreements between battery cell manufacturers and their own material suppliers.
The report aims to make it clear that Tesla is aware of the environmental and social impact of mining in the manufacture of electric cars, which makes this task a challenge that will influence the adoption of electric vehicles in the future. Tesla is a member of the Initiative for Responsible Mining Assurance (IRMA), and with its direct sourcing strategy it also helps ensure implementation of those standards.
