Is the Sky Falling on Tesla?
“There’s going to be a supply shortage, and it’s going to make you a millionaire.”
I uttered these fateful words to a colleague on July 28, 2016, and they still ring true to this day.
It was less than 24 hours before the official grand opening of Tesla’s first Gigafactory, and the media was frantically buzzing around the site in Nevada.
We can’t exactly blame them for their enthusiasm. After all, that first Gigafactory was the first of possibly 10 similar battery factories the tech magnate is hoping to have up and running in the coming years.
Remember, the Gigafactory’s planned battery production capacity is 35 gigawatt-hours.
So just ONE of these facilities is practically doubling the world’s current battery production.
At the time, you and I saw a lucrative opportunity to capitalize on exorbitant demand for lithium that will inevitably surge off of the world’s insatiable lust for new tech.
Say what you will, but nobody can deny that people love their new gadgets. Loyal Apple followers line up around the block for each new iPhone that is released.
Tesla already has a list for Model 3 deliveries that is half a million names long.
One very common mistake the investment herd is making is thinking that Tesla is the only game in town...
Close your eyes and imagine another 10 such Gigafactories churning out batteries at an ungodly pace.
Daimler’s upcoming lithium-ion battery will boost its production capacity fourfold.
Energy Absolute is planning to build a nearly $3 billion battery factory in Thailand and intends to scale its capacity up to 50 gigawatt-hours within the next three years.
China, Europe... these Gigafactory projects are springing up all over the place — even in Buffalo!
We’re witnessing an “arms race” in battery production taking place right now, and the first companies to effectively ramp up their lithium-ion battery production will be the winners.
So when I mentioned there was going to be a supply shortage, you can start to understand how critical it will be to the future of these projects.
But there’s a catch...
I wasn’t talking about lithium.
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Is the Sky Falling on Tesla?
Elon Musk is a man with priorities.
You don’t get to that level without being able to deliver when the time comes.
What you absolutely must do, however, is avoid any public scrutiny.
After successfully raising $1.8 billion in bonds that are set to mature in eight years, Musk only has one mission: ramping up battery production.
Unfortunately, that won’t be so easy without one vital ingredient: cobalt.
Look, I honestly do not believe that an overwhelming amount of investors understand just how bad the situation is for cobalt supply.
But Musk understands...
Buried in the prospectus for Tesla’s monster debt offering, he only mentions the element a single time. John Dizard accurately pointed us toward Musk’s quiet warning over cobalt.
It’s listed as a potentially at-risk material for Tesla.
And that, dear reader, is hardly surprising given the fact that cobalt makes up more than one-third of a lithium-ion battery.
Without it, we would have to give up our smartphones, Model 3s, and any other product that uses these batteries.
All of them.
In fact, cobalt consumption is already outpacing supply.
And soon, it’ll turn into a full-blown crisis for the world’s largest tech companies.
This is where things go from bad to worse for Musk...
When 60% of the world’s supply of cobalt comes from a region where 4-year-olds are put to work in mines, it’s only a matter of time before these stories break into the mainstream media.
Think of this situation like blood diamonds, except we can choose not to buy diamonds.
Nobody wants to give up their iPhone.
The cold, bitter reality for Musk is that not only does the Democratic Republic of Congo supply most of the world’s cobalt, but its production is almost nine times more than China, the second-largest cobalt producer.
So why isn’t the Tesla Titan sweating at night?
Well, it turns out he may be one step ahead of the competition — again!
I’ll strongly urge you to check these details out for yourself... then invest accordingly.
Until next time,
A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.
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