Tesla’s raw material needs, including lithium, are increasing rapidly with its battery production ramp-up at Gigafactory 1 in Nevada to support the Model 3 production and other energy storage projects.

Now we learn that the company is reportedly in talks with SQM, Chile’s largest lithium producer, to secure lithium supply.

We reported a few weeks ago that Tesla CEO Elon Musk arrived in Chile sparking lithium rumors again.

Now Eduardo Bitran, the executive vice-president of Chilean development agency Corfo, told the Financial Times (paywall) that Tesla is in talks with SQM and that it could even have plans to build “a processing plant in Chile to produce the high-quality lithium it needs for its batteries.”

The executive added:

“With an increasing supply of lithium, Chile is key for any company that wants to become global in electro-mobility. Being close to Chile or having a strategic alliance in Chile becomes a strategic factor for a company like Tesla.”

Bitran says that the talks are still in early stages, but Tesla has been interested in the lithium developments in Chile for years now.

Tesla officials have previously visited Chile, where there are large lithium deposits, in order to evaluate partnerships with local lithium miners.

To date, most of the automaker’s batteries have been coming from Japan with Panasonic handling the supply chain. But now that Gigafactory 1 is in operation in Nevada, Tesla is more involved in the supply chain.

Back in January 2017, Tesla said that it had secured lithium supply through 2017, but the real volume is expected to come in 2018 with the Model 3 production ramp-up to 5,000 cars per week.

Tesla already signed a conditional supply agreement with Pure Energy Minerals, which has claims on 9,500 acres of lithium brine in Clayton Valley – just a four-hour drive from the Tesla Gigafactory. The company is still far from entering a production phase and therefore, Tesla would need to secure other sources.

Chile is believed to have one of the largest and most accessible reserves of lithium in the world and several mining companies are currently rushing to exploit those resources.

Other South American countries also have lithium reserves.

Earlier this year, Tesla officials visited Argentina’s Governor of Salta to talk about solar and storage projects as well as sourcing lithium.

Electrek’s Take

It’s not surprising to learn about Tesla trying to secure lithium supply. The company has been doing it for years now and even unsuccessfully tried to buy a lithium startup years ago.

But it’s interesting that a processing plant could be in the cards too since Musk talked before about his ambitions to eventually build a Gigafactory directly where raw materials are being sourced.

Of course, that doesn’t necessarily mean it would be where lithium is being sourced since it’s an important resource for Li-ion batteries, but it’s not actually the biggest by volume.

It could also just be a more simple processing plant to send lithium hydroxide to Gigafactory 1.

Either way, it’s an interesting development in the race to secure supply of key battery materials ahead of an expected great expansion in demand in the next few years.

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