Elon Musk relieved that lithium prices are no longer insane

Image by Brad Holt on Flickr

After complaining last year about surging prices for lithium, a metal used in electric-vehicle batteries, Elon Musk is feeling some relief.

“Lithium prices went absolutely insane there for a while,” the Tesla Inc. chief executive said Wednesday during the EV maker’s earnings call. After rising commodity prices made it difficult to cut costs last year, Musk said he was now “seeing what seems to be deflationary pressures.”

Chinese prices of lithium carbonate, a refined form of the metal, have halved from a peak in mid-November as supply pressure eased. Nickel and cobalt, which also are used in batteries, have dropped as well.

The reduction in commodity prices translates into thousands of dollars on a per-vehicle basis, Karn Budhiraj, vice president for supply chain at Tesla, said on the call. To lock in the lower costs, the company is extending some fixed-price contracts with suppliers through the end of this decade, he said.

Still, Tesla reported shrinking profit margins in the second quarter, and Musk said the company will continue cutting EV prices if interest rates keep rising.

Tesla broke ground on its own lithium refinery in Texas earlier this year. Progress on the plant, as well as a cathode facility, is going well, Musk said on the call.

(By Annie Lee)

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