Supply is now under threat.
Eccentric entrepreneur Elon Musk has achieved great success with Tesla and is looking to build on that moving forward. The CEO believes that Tesla can dominate EV production by the end of the decade, and with one of its critical suppliers looking to set up shop in the US, those ambitions could well become reality. Moreover, as the automaker sees record-breaking demand continue, it is perfectly positioned to extend its lead over other newcomers to the EV game. Tesla produced an impressive 305,407 cars in the first quarter of this year while so many others struggled with production issues stemming from supply challenges, but now the Texas-based brand is finally suffering these same issues, and production has dropped as a result.
During a call with investors yesterday, Tesla CFO Zach Kirkhorn said that “numerous supply interruptions, including shutdowns in [Tesla’s] Shanghai factory and nearby suppliers due to COVID” had been the cause of Tesla’s halted production growth. Interestingly, the first quarter of 2022 was the first occasion where Tesla’s quarterly car production had dropped since the start of the pandemic. Despite the drop, Tesla is still holding strong above the 300,000-unit mark.
“We’ve lost about a month of build volume out of our factory in Shanghai,” said Kirkhorn. “Production is resuming at limited levels and we’re working to get back to full production as quickly as possible.”
CEO Elon Musk believes that output will likely remain flat in the second quarter but would return to positive growth in the last six months of the year. Tesla is aiming for more than 1.5 million vehicles to be produced this year.
Tesla
Tesla
With these goals in mind, Musk has publicly called for more investment in lithium mining to close the large gap between supply and demand, saying that lithium supply is the “fundamental limiting factor” in large-scale EV adoption. “We think we’re going to need to help the industry on this front,” said Musk. “I’d certainly encourage entrepreneurs out there who are looking for opportunities to get into the lithium business. Lithium margins right now are practically software margins.”
He seems to be right about the potential for earning in this sphere, as Benchmark Mineral Intelligence recently compiled an index of global lithium prices and found that they had soared 280% in 2021 and another 127% in the first quarter. If supply doesn’t improve, EVs like the Model Y are only going to get pricier, not more accessible.
