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Graphite pollution in China overcasts Tesla's growth plan

Posted: 20 Mar 2014  Print Version  Bookmark and Share

Keywords:Tesla  graphite  Gigafactory  China  pollution 

Electric vehicles promote an environmental cause. Ironically, a vital constituent of EV batteries—graphite—is identified as one source of pollution in China, which could thus threaten Tesla's EV growth plans.

Industry analysts have estimated that output from Tesla's Gigafactory could increase natural graphite demand by as much as 37 per cent in six years. The Gigafactory, which is scheduled to begin production by 2017, is targeting an output of 35GWh/yr by as early as 2020, more than double the size of the current lithium-ion battery market.

The Gigafactory is designed to lower lithium-ion battery costs by more than 30 per cent per kilowatt hour. Tesla CEO Elon Musk said he believes the cost of Li-ion batteries can drop to $100/KWh, making them critical to the company's goal of producing a price-competitive EV at about $35,000/unit. Musk added that based on lower EV prices, the company expects an increased sales volume at 500,000/yr by 2020, with the Gigafactory's cell output at 32GWh/yr.

Unfortunately, there are now signs that a large polluted cloud on the horizon could interfere with the battery price reduction strategy. Industry experts estimate that every EV contains about 50Kg of graphite, compared with the 10Kg or hybrid cars. Other big users of lithium-ion batteries such as laptops contain about 100g of graphite while mobile phones contain about 15g.

A good deal of the world's graphite is mined and processed in China, where graphite pollution has been raising health scares by fouling air and water supplies and damaging agriculture production. A number of graphite mines and processors have been closed down by the Chinese authorities in a bid for cleaner air despite the rapid upswing in global demand spurred on by the clamour for mobile device technologies and the prospect of the threatened sea-change in EV-based urban transportation. These clampdowns could impact as much as a third of worldwide production.

Hydrochloric acid is used in China to process raw graphite into a usable form. The highly corrosive acid is already implicated in waste water pollution at incidents in China and is another factor in the squeeze being applied to graphite producers in that country.

China's tougher environmental regulatory stance looks like pushing graphite prices up by as much as 30 per cent this year. Some analysts said that the regulation would have a minimal impact on the overall price of electric cars, although it certainly could slow the hoped for long-term decline of battery prices.

Tesla's battery Gigafactory plans on their own could double demand for graphite in batteries which would be probably equivalent to bringing six new mines into production somewhere in the world.

The graphite pollution issue in China may well interfere with Tesla's and other EV manufacturers' plans for battery cost reductions because China has been cutting back on graphite in recent months with more than 50 graphite operations being suspended in Shandong province owing to environmental breaches. The province represents 10 per cent of global supply and the Chinese government intervention is also threatening to extend the clampdown to other poorly-run graphite producers.


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