Global EV (electric vehicle) sales are rising at a fast pace and Tesla and other automakers are scrambling to secure supplies of key battery materials like cobalt and lithium.

The WSJ reported that Tesla was in preliminary talks with Glencore for a stake sale. However, the talks did not materialize. Glencore is the world’s largest cobalt producer and mines almost a third of cobalt globally.

The company mines cobalt in Australia, Cobalt, as well as Norway. However, most of its cobalt comes from DRC, which is the largest cobalt-producing country.

Glencore is also a major producer of copper. Copper demand is expected to soar in the next decade as the copper intensity is much higher in electric cars as compared to ICE (internal combustion engine) cars.

Glencore also has a trading arm that sells different commodities. As EV makers look to secure supplies of key battery metals, companies like Glencore are witnessing renewed interest from investors. Notably, in 2020 Tesla partnered with Glencore for cobalt supply.

Earlier this year, General Motors also entered a multi-year cobalt supply agreement with Glencore. Legacy automakers are scaling up their EV production and are investing billions of dollars toward vehicle electrification.

General Motors announced partnerships with LG Chem and Livent to secure supplies of battery materials. Ford has also announced plans to secure raw materials to achieve a production run rate of 600,000 EVs by 2023 and 2 million by 2026.

EV makers Scramble to Secure Supplies of Battery Materials

Ford also partnered with CATL “on strategic cooperation for global battery supply.” The company is also looking to localize battery production in the US. We have a guide on how to buy Ford stock in 2022.

In order to hasten the EV pivot in the US, President Biden has signed the Inflation Reduction Act of 2022. Among others, it has increased the outlay towards the EV tax credit. The Act also has battery sourcing requirements beginning in 2024, and by 2029 the battery would need to be built in North America to be eligible for the tax credit.

In August, Toyota announced an additional $2.5 billion investment in Toyota Battery Manufacturing North Carolina which would help support higher EV production in the country. Toyota expects production at the North Carolina plant to begin in 2025 which would help it meet the battery sourcing requirements.

According to Wolfe Research, Tesla would stand to gain from the Inflation Reduction Act. Wolfe upgraded Tesla stock to a buy and raised its target price, joining the list of other brokerages who turned bullish on the EV company after Biden signed the Act.

Tesla Is Getting into Lithium Refining

Tesla, which is the largest EV seller in the US and the second largest NEV (new energy vehicle) globally, is also getting into lithium refining and is looking to set up a lithium hydroxide refining plant in Texas

During Tesla’s Q2 2022 earnings call, Tesla’s CEO Elon Musk called upon entrepreneurs to set up lithium refining businesses. Musk said, “So it is basically like minting money right now. There’s like software margins in lithium processing right now. So, I would really like to encourage, once again, entrepreneurs to enter the lithium refining business. You can’t lose.”

NIO is also looking to secure lithium supplies and bought a stake in Greenwing Resources, a lithium miner in Australia. NIO and other EV stocks have crashed in 2022. However, almost all the analysts covering NIO see it as a good buy.