{"id":24990,"date":"2017-11-15T19:07:55","date_gmt":"2017-11-16T00:07:55","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/tesla-shoots-itself-in-its-blue-suede-shoes\/"},"modified":"2017-11-15T19:07:55","modified_gmt":"2017-11-16T00:07:55","slug":"tesla-shoots-itself-in-its-blue-suede-shoes","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/tesla-shoots-itself-in-its-blue-suede-shoes\/","title":{"rendered":"Tesla Shoots Itself in Its Blue Suede Shoes"},"content":{"rendered":"

Global warming has been good for Tesla. The Model E, Tesla\u2019s electric car for the masses, garnered 400 thousand pre-orders before the design was even finished.[1]<\/a> Tesla built its own battery plant, known as the Gigafactory, to supply the huge lithium-ion battery demand of Model E production. To enhance its positive environmental impact, Tesla committed to sourcing the plant\u2019s materials from North America to reduce supply chain emissions.[2]<\/a><\/p>\n

But is that even possible? Can a factory that doubles global lithium-ion battery capacity be solely supplied by local material?[3]<\/a> Did Tesla\u2019s promise to restrict supply to North America go too far?<\/p>\n

There are many kinds of lithium-ion batteries, but only those with the highest energy density are fit for use in EVs. These batteries require lithium, graphite, and cobalt (colloquially known for its impure oxide, which is blue).[4]<\/a> The sheer scale of the Gigafactory will likely cause short-term supply issues for all three key ingredients. However, relative abundance and cheap refining costs of North American lithium and graphite should allow for local sourcing in a few years.[5]<\/a> Cobalt is a different story.<\/p>\n

Before we examine North American cobalt supplies, it is important to understand why the cobalt supply is tricky to begin with on a global level.<\/p>\n

1) About 97% of cobalt is generated as a byproduct of nickel and copper refining.[6]<\/a> When prices for these minerals fall or fluctuate, as they have over the last few years, mines suspend operations and produce less cobalt byproduct.[7]<\/a> For example, global cobalt production fell from 126 megatons to 123 megatons from 2015 to 2016 in spite of increasing demand.[8]<\/a><\/p>\n

2) Cobalt rarely occurs in concentrations high enough to justify primary mining (initiating and operating mines specifically for cobalt).[9]<\/a><\/p>\n

3) More than 50% of cobalt production and known reserves are in the D.R. of Congo where it is often mined by children in deadly working conditions. Recent Amnesty International and Washington Post reports shed light on the issue, forcing many buyers to re-evaluate their cobalt supplies.[10]<\/a> Apple, for example, announced that it would classify cobalt as a conflict mineral and only source responsibly mined material.[11]<\/a> D.R.C. mining improvements will take time, inhibiting parts of the world\u2019s largest cobalt supply. To further complicate the scenario, the D.R.C. continues to experience political strife. Peaceful transfer of power has been delayed twice in the last year, and many fear conflict in the coming year.[12]<\/a><\/p>\n

The cobalt pipeline becomes even tougher if you restrict supply to North America, where the mineral is far less abundant. Some simple math reveals why Tesla may have a problem:<\/p>\n