The key challenge to Tesla’s growth

Tesla\'s increasingly ambitious plan to control not only electric vehicle space, but also solar space is likely to become more difficult to achieve next year.
It has been widely reported in recent weeks that Tesla\'s gigafactory faces some challenges in full operation.
It may not be clear that Tesla and its Geely plant will face the scale of supply chain challenges.
Tesla aims to produce 500,000 cars by 2018.
The company has largely accelerated the production schedule because of the company\'s huge demand for its Model 3 sedan.
The company announced that it had booked nearly 375,000 vehicles for the car.
In order to meet this demand, and the new demand that the company may see in the next few years, Tesla needs to produce more lithium-ion batteries in 2018 than it produced worldwide in 2013.
This is not an impossible feat given the size of the Gigabit plant, but it is a challenge.
In particular, while Tesla may have the facilities to make the required batteries, the company still needs enough metal to make all of them.
Tesla needs a lot of nickel, cobalt, aluminum, and most importantly lithium to achieve its ambitious plan.
Less than 18 months from the beginning of 2018 does not mean that the company has too much time to start all the plans.
Tesla\'s plans also set the company to compete with other small electronic devices such as Apple and IBM that require lithium-ion batteries.
To meet the challenges of the supply chain, Tesla is drawing a page from Henry Ford\'s script and trying to vertically integrate its supply chain (hence the Gigabit plant ).
To meet demand for metal purchases, Tesla is hiring supply chain experts to help it make deals with small miners around the world.
The company has signed agreements with Pure Energy Metals and Bancanora metals.
Pure Energy is exploring lithium deposits in Nevada, while Bacanora Minerals is developing lithium deposits in Sonora, Mexico.
According to Macquarie Research, lithium supply may remain tight in 2016, with a deficit of 4,500 metric tons this year and then balanced in 2017 and 2018.
However, the temporary easing of demand shortages will be short-lived, with high demand ten years later leading to a lithium shortage of 46,000 tons by 2021.
Nickel may be a bigger problem, though.
Although their name is lithium-ion batteries, lithium-ion batteries are only about 2% lithium by mass, while nickel is a greater cost contributor.
At a recent investor call, Elon Musk announced that nickel prices were the main driver of battery costs.
In 2014, the price of nickel was as high as $21,000 per metric ton before China\'s economic slowdown became apparent.
Since then, nickel prices have fallen, but the current small nickel surplus may turn into a deficit by the end of the decade, which brings more trouble to Musk and Tesla.
While Tesla is now smart to plan for future battery needs, other companies may do the same, as long as they can keep up with the growing demand of automakers.
It is clear that most companies will be dead in the face of Tesla\'s problems.
While most companies have too little demand and low sales, Tesla\'s problem is the opposite.
The company can sell almost every car at high prices and high profits.
The problem of making all these cars is being solved.
Tesla\'s production has grown dramatically in recent years, but, in three years, from producing about 50 k cars to producing about 500 cars, it will be a daunting feat.
Investors should continue to pay attention. OilPrice.
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