Fueling Tesla’s Model 3 Cobalt Plans

  • 54% of the world's cobalt supply comes from Democratic Republic of Congo
  • Tesla on track to produce 5,000 Model 3’s a week by the end of June

Update: Elon Musk just told us, "We use less than 3% cobalt in our batteries & will use none in next [generation]." So, what's exactly his strategy for getting cobalt out of Tesla's batteries?

Tesla (TSLA +4.55%) is inching closer to reaching its Model 3 production goals. As the electric vehicle (EV) sector attempts to move from niche market status to mainstream acceptance, cobalt demand is surging since it’s one of the main components in these car batteries. Could cobalt become the Achilles heel for Tesla’s Model 3 ambitions?

Why This Matters: Currently Tesla is making 3,500 Model 3 vehicles a week and Musk stated they’re on track to reach 5,000 a week by the end of June. Tesla has blamed bottlenecks in the production of the Model 3’s batteries at the company’s Gigafactory for the delays.

Some of these battery delays can be attributed to the high demand for Africa’s cobalt. 54% of the world's cobalt supply comes from Democratic Republic of Congo. A 2017 report from Morgan Stanley (MS -0.25%) projected as many as 1 billion electric vehicles could be on the road worldwide by 2050.

The production of cobalt in the U.S. is pretty low at just 650 metric tons in 2017, according to the U.S. Geological Survey. If you compare this to the Congo’s production of 64,000 metric tons last year it’s clear how important the region is for Tesla.

What makes cobalt so valuable to EVs? This is where it gets a bit technical. The cathodes in lithium-ion batteries typically used in EVs are made of metal oxides that contain a combination of cobalt and other elements. Cobalt allows the cathodes to focus immense power in a confined space. Simply put, without the element's energy density batteries without cobalt tend to perform worse.

Situational Awareness: Amnesty International alleged in 2016 that Apple (AAPL -0.25%) and Samsung’s (005930.KS +0.50%) Chinese suppliers were buying cobalt from mines that rely on child labor. Tesla has pledged to not take cobalt from child labor. However, it's hard to track the metal's origination once it has reached the end of the supply chain.

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