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EVs Driving Lithium to New Highs

Tesla started the fight, but someone else will finish it...

Written by Meg Dailey
Posted March 18, 2017

It just keeps happening...

Everyone seems to be gunning for Tesla’s spot at the top of the EV market these days, from tiny startups to the biggest car companies in the world.

And all because Tesla proved it could be done — that electric vehicles were not only viable, but valuable.

When the company was founded, it was nothing more than a startup itself. And among its peers at the time, it's the only one to have survived this long.

In fact, it’s not just surviving; it’s thriving.

So it’s really no wonder that competitors are not only coming out of the woodwork, but coming out of Tesla itself...

Factory-Made Competition

The latest round of Tesla competitors have a few things in common... first and foremost that they’re being run by ex-Tesla employees.

Lucid Motors, for example, was founded in 2007 as Atieva. It was always an EV company, but it didn’t become a distinct threat to Tesla’s dominance until two ex-Tesla vice presidents, Bernard Tse and Peter Rawlinson, came on board.

Rawlinson had also been a head engineer for the Model S, with which the Lucid Air EV is now aiming to directly compete.

An even younger company, NorthVolt AB, was founded in 2015 when ex-Tesla logistics and supply chain manager Peter Carlsson left the company.

Young though this company may be, it’s jumping right into the path of Tesla’s progress.

Only it’s not doing it with cars. Oh no, it’s going way bigger than that...

You see, both Lucid Motors and NorthVolt AB are looking to build their own lithium battery factories within the next few years.

Of course, neither project is going to be quite as big as Tesla’s infamous Gigafactory, currently operating in Nevada. This project cost Tesla $5 billion and will have the capacity to produce as many as 500,000 EV batteries per year, at least by Elon Musk’s ambitious estimations.

Lucid’s factory will be built in Arizona, cost around $700 million, and only build batteries for the still-in-development Lucid Air for now.

NorthVolt, on the other hand, will really be giving Tesla a run for its money. Its battery plant will build a variety of lithium batteries for different applications, including EVs and large-scale energy storage.

The factory, which will cost about $4.2 billion, won’t be stuck building batteries for a single line of cars; its main purpose is actually to cut the overall cost of lithium batteries in half.

This is a goal Tesla has had for quite a while now, though it’s fair to say there have been some... speed bumps on the way there already. Not the least of these is the company’s acquisition of SolarCity last year, which gave it yet another financial hurdle to cross.

Will NorthVolt have an easier time of it without all the extra baggage?

Honestly, it’s enough that it’s even trying.

Proven Perspective

Once again, I have to accuse Tesla of starting the fight.

Before it announced the game-changing Gigafactory, the only companies that had massive battery factories were, well, battery companies.

Moreover, they weren’t usually so focused on a single battery type.

Now every new startup, car company, and even some technology companies are mulling over their own lithium battery factories. Megafactories in China are expected to be at the head of the pack, prompting as much as 521% growth in global lithium battery production by 2020.

VC Battery CapacityImage Source: Visual Capitalist

The market for lithium batteries is expected to grow to $77.42 billion by 2024, according to Transparency Market Research. That’s up from just under $30 billion in 2015.

And while consumer electronics will still hold the majority of the market by then, most of the growth will be coming from EVs.

There’s no solid estimate for how big the electric vehicle market will be by then. It could reach just 1% of new cars sold (EIA) or a full 35% (Bloomberg New Energy Finance).

But the conclusion every single estimate comes to is that EVs are spreading fast and will soon be the norm rather than the exception.

Bringing the price of those batteries down is the essential next step to widespread adoption, and keep in mind that Tesla and NorthVolt aren’t the only competitors on the case.

At this point, even if NorthVolt fails to meet its goals, there will be someone else ready to take up the gauntlet.

Do What You Must, We’ve Already Won

The same way Tesla went from startup to market legend, its Gigafactory is just the beginning of a lucrative new market segment.

And one day, its fame may fade into the background as bigger players take the spotlight.

But that won’t matter in the bigger picture, and today's energy investors know exactly why...

The lithium revolution is already going full steam ahead. Every bit of new competition only boosts this booming market higher still.

Until next time,

Megan Dailey
Energy and Capital

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