Tesla will buy 301,000 tons of lithium from a single Chinese company

Tesla signed a lithium supply agreement this week with a subsidiary of the Chinese group Yahua Group. More specifically, the contract has been established with Yahua Lithium Co., Ltd., a division of the Chinese company Yahua Group.

According to local media, the agreement establishes that Tesla will buy lithium carbonate to Yahua from 2025 to 2027. The amount of the operation or the price of said product has not been announced.

Furthermore, Yahua also provides lithium hydroxide to Tesla. Both companies have a current contract for the supply of lithium hydroxide from 2021 to 2025, valued at 5.6 billion yuan (about 720 million euros at the current exchange rate).

According to this contract, Tesla will receive a supply of 301,000 tons of lithium hydroxide from 2023 to 2030. The amount of pure lithium needed for each battery varies depending on the type of cell, but about 850 grams of lithium carbonate equivalent (LCE) per kWh of battery capacity can be taken as a reference. The batteries in Tesla’s best-selling electric cars have 60 or 75 kWh capacity.

Lithium supply deal with Yahua likely will serve as a source of supply for the Shanghai Gigafactorywhere not only the Model 3 and Model Y are manufactured for the Asian market (the largest in the world), but also the Model 3 for the European market.

The American automaker has been strengthening and diversifying its global supply chain to comply with regulations and tax benefits in different markets, including the United States. In the United States, the Inflation Reduction Act (IRA) establishes that no manufacturer or electric vehicle can have tax benefits if it uses miners from China. For that reason, Tesla has partnered with Piedmont Lithium, which received permits to source its minerals in North Carolina earlier this year.