Tesla is evaluating whether to set up a lithium refinery on the Texas Gulf Coast, in order to secure the supply of the precious material used to make electric car batteries.
The electric car company plans to process raw ore material on-site into a "usable state" for lithium battery production, which is now mostly produced in China, the mineral's largest processor and exporter.
Tesla's founder and CEO, Elon Musk, has previously said that the car company may have to directly enter the mining and refining industry as lithium prices surge worldwide.
There have been dozens of projects throughout North America, Australia, and the European Union, but other attempts have faced a range of setbacks.
Australia, opened production at a new processing site earlier this year, while Albemarle Corp., the world’s top lithium producer is constructing a separate refinery in the southeastern United States.
If Texan authorities approve the proposal, construction could begin in the fourth quarter of this year, with the plant coming into full operation by the end of 2024.
The decision to build will be further based on the willingness of the authorities to provide relief from local property taxes.
Tesla said that the battery plant could be built anywhere with access to the Gulf Coast shipping channel, a site in Louisiana has been proposed as an alternative backup.
The EV maker admitted that it is still evaluating the feasibility of the project and that it is in a "preliminary development" stage.
The company said it was planning the development of more facilities in the region to expand its battery materials processing, refining, manufacturing, and ancillary manufacturing operations to support its manufacturing base.
Wanted: US-Based Battery MakersThe Biden administration has been recently encouraging battery makers to move production back to the United States and has implemented stricter regulations and tightened tax credit eligibility in a recently passed bill to counter China's dominance in this area.
"The process Tesla will use is innovative and designed to consume less hazardous reagents and create usable byproducts compared to the conventional process," said Tesla in a statement.
Tesla said it will invest in improved transportation infrastructure, lithium refining equipment, warehousing, buildings, R&D laboratories, power utilities, rail spurs, cooling towers, safety and fire prevention equipment, and wastewater treatment plants, to ensure that the new complex is suitable to produce the batteries and EV cars on the spot.
Changes in Lithium MarketTesla earlier signed a five-year battery deal with Australia's Liontown Resources this year, while rival EV makers Stellantis and Byd have made similar global investments, and CATL, the world's biggest battery maker, has done the same.
Musk earlier applied for permits to build a similar battery plant next to its Austin auto factory in Texas and is also expanding his SpaceX massive rocket and launch facility in Boca Chica, Texas.
Meanwhile, his other company, The Boring Company, is pursuing other numerous projects across the state.
In April, the Tesla CEO told analysts in an earnings call that lithium production is a hurdle to meeting EV demand and urged entrepreneurs to get into the mining business.
"Right now, we think mining and refining lithium… appears to be a limiting factor, and certainly is responsible for quite a bit of cost growth in sales," said Musk.
"I think it’s the single biggest cost growth item right now."
"Can more people please get into the lithium business? Do you like minting money? Well, the lithium business is for you," Musk concluded.
Lithium prices have skyrocketed this year due to surging demand from the auto sector and supply chain issues due to lockdowns in China, which have left automakers scrambling to sign deals with alternative mining companies and refiners.