Elon Musk calls this Tesla business a “license to print money” — and profits may start to rise

There is little question that. Tesla (TSLA -0.31%) Stocks have been a winning investment for shareholders. So far this year, the electric vehicle (EV) maker’s stock is up roughly 78 percent, well ahead of a record 13 percent gain. S&P 500. Over the past five and 10 years, the stock has grown 853% and 1,930%, making it more profitable over the long term.

This significant development in recent years has led some investors to question whether easy money has already been made, with Tesla stock expected to yield many more muted gains in the coming years.

A challenge to that assumption is that CEO Elon Musk’s recent statement suggests that one of Tesla’s new innovations will be incredibly profitable: “It’s a license to print money.” Even better, profits from that trade may begin earlier than expected.

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The lithium filter is in high demand

Tesla is working hard to get its lithium refinery up and running, and the lithium hydroxide it produces will be used as a component in the battery cells produced at the Tesla Gigafactory. Earlier this year, the company announced that it is expanding its operations to include a 100-GWh 4680 cell plant in Nevada, which can produce batteries to power approximately 1.5 million light-duty EVs annually. Additional reports indicate that Tesla is targeting 500 GWh in the long term, although the company did not provide a time frame for the additional capacity.

The refining facility in Robstown, Texas, was originally slated to end lithium production in 2025. Jason Bevan, Tesla’s battery product manufacturing manager, provided updated guidance in an interview with local media in Corpus Christi, Texas:

We will begin commissioning the assets around the beginning of next year, and that will continue in earnest in the first half of next year. In the middle of next year, they will start to increase the production.

Bevan continued: “Beyond these first two trains, we have assets suitable for future expansion, so I think there’s a huge opportunity for continued economic impact beyond the direct workforce we employ.” hire”

Tesla is in control of his destiny

This is an important step for Tesla. Lithium is one of the key materials used to make electric vehicle batteries, but as demand continues to grow, there is a shortage of highly purified lithium hydroxide. The issue is not a shortage of raw metal, but “limited global capacity to deliver ultra-high-purity battery-grade hydroxide,” according to a Bloomberg report. China accounts for more than half of the world’s refining capacity and 40 percent of demand.

The resulting shortage led to a net increase in lithium prices earlier this year, driving up production costs. Prices are expected to remain modest but volatile, with another price increase expected as the economy recovers and demand for EVs picks up again. This could eventually lead to net lithium shortages around the world, and at least one analyst suggests the shortage could reach as early as 2025.

It seems no coincidence that Tesla accelerated the opening of the refinery. When completed, this project will greatly increase lithium refining capacity in the United States, which currently produces only 2 percent of the global supply.

Demand for lithium will only increase from here, according to a report from CNBC. The report cites an S&P Global Commodity Insights report that predicts EV sales will more than double by the end of the decade, from 13.8 million in 2023 to 30 million in 2030.

By refining its own supply of lithium hydroxide, Tesla uses it in two ways. First, the company controls its own destiny in the process and is no longer held hostage by supply and demand constraints. Tesla can also sell the excess lithium hydroxide it produces — “generating money” in the process.

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