Categories:
Energy
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General Market Commentary
Topics:
General Energy
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General Market Commentary
Doing the math on Tesla’s potential new demand for flake graphite
In my June 29th article, I wrote about the tear down of a Chevy Bolt which had allowed UBS to review the manufacturing cost of this car’s powertrain lower by $4,600. I also told you they were expecting Tesla to break-even on the Model 3 at a sticker price of $41,000 which they deemed likely based on a high take rate of options.
A lower manufacturing cost for the electric powertrain has caused UBS to review its 2025 EV market penetration forecast. They now see it at 14% globally, up from 9% before.
Knowing that the annual global production of new cars is well over 90M at the moment, it is fair to expect at least 100M by 2025. An increase of 5% in this forecast is thus 5M of additional EVs to be produced every year. In its reporting, UBS also looks at the impact this forecast will have on battery raw materials such as graphite and lithium.
The UBS Global research report is very impressive. The research team looked at pretty much all aspects to be touched by the electrification of transportation. The battery raw materials though were not at the center of the analysis as they are discussed on a mere two of the 95 pages report. They evaluate the Bolt’s battery to contain 1.1 kg of graphite per kWh while it is ~0.9-1 kg per kWh for the lithium carbonate equivalent.
UBS is bullish on the graphite and lithium demand. By 2025, they expect the graphite market to grow by 1.7x as per their base case scenario or by 2.0x if the upside scenario plays out. For lithium, this is by 4.5x and 7.5x respectively. The graphite market today is much bigger than the lithium market. UBS evaluates it at $16.2B while it is $2.7B for lithium. They do not mention the proportion of each type of graphite in this total market value. One has to assume that $16.2B is thus the value of amorphous, flake, vein and synthetic markets together. The li-ion batteries, however, use a feedstock of a combination of natural flake graphite and/or synthetic graphite. As amorphous and vein graphite demand are not expected to grow, one can assume that natural flake and synthetic graphite demands will grow in a higher pace. In the case of natural graphite, the flakes need to be further purified, and both natural and synthetic need to be processed (shaping and coating) to produce anode material. Let’s look at this for a moment.