Analysis-Musk's bold goal of selling 20 million EVs could cost Tesla
billions
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[August 30, 2022] By
Paul Lienert and Joseph White
DETROIT (Reuters) - Tesla Inc Chief
Executive Elon Musk has set his young company on an aggressive expansion
path like no other auto executive has dreamed - but one riddled with
potholes and road blocks that could stall or sidetrack the journey.
Musk's audacious goal of selling 20 million electric vehicles in 2030 is
at the center of the company's growth promise for shareholders and its
pledge to drive the adoption of sustainable energy. If achieved, it
would make Tesla twice the size of any automaker in history, accounting
for roughly 20% of the global vehicle market.
But such exponential growth - a 13-fold increase over the estimated 1.5
million vehicles it hopes to sell this year - will come at an
unprecedented cost of hundreds of billions of dollars, according to a
Reuters analysis of Tesla's financial disclosures and forecasts for
global electric vehicle demand, EV battery and battery mineral
production.
"I'd equate this with the Manhattan Project in World War Two," said
manufacturing expert Michael Tracy of The Agile Group, referring to the
sweeping effort by the United States to build an atomic bomb.
Musk's vision poses staggering challenges to the 19-year-old Texas-based
automaker, not the least of which is securing enough batteries and
critical raw materials such as lithium and nickel to supply 20 million
vehicles.
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Tesla has been a disruptor, but this next phase of growth, if achieved,
would go beyond disruption to fundamentally remake the global auto
industry as well as the mining and trade of battery materials.
Along the way, Tesla would need to build seven or eight more "gigafactories"
- an average of one every 12 months or so - take share from every
competitor and emerge as a company the size of Volkswagen AG and Toyota
Motor Corp combined. It would also need about 30 times as much battery
capacity to supply all of its vehicle factories.
The price tag will be steep: Tesla could spend an estimated $400 billion
or more over the next eight years to build new vehicle assembly and
battery plants around the globe, and another $200 billion or more to
build or buy the batteries, including the cost of the raw materials.
Canada, Indonesia, India and other governments are already lobbying to
win Tesla's next investment in EV production, an announcement Musk has
said could come by the end of the year.
Producing 20 million vehicles a year would require Tesla to expand both
its own battery-making capacity, and the capacity of its battery
partners and the raw materials producers that supply them.
"Long-term, we're expecting to make on the order of 3,000 gigawatt hours
or 3 terawatt hours per year," Musk told investors in July. "I think
we've got a good chance of achieving this actually before 2030, but I'm
highly confident that we could do it by 2030."
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![](../images/083022PIX/busine27.jpg)
Tesla Inc CEO Elon Musk walks next to a
screen showing an image of Tesla Model 3 car during an opening
ceremony for Tesla China-made Model Y program in Shanghai, China
January 7, 2020. REUTERS/Aly Song/File Photo
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Tesla's current battery production capacity is 100 gigawatt-hours.
Benchmark Mineral Intelligence, which tracks the global EV battery industry,
expects that Tesla will require 2.0 million tons of lithium, 1.3 million tons of
nickel, 0.2 million tons of cobalt and 3.5 million tons of graphite to support
production in 2030 of 3.0 terawatt-hours of battery production.
That is four times as much lithium and nickel, twice as much cobalt and seven
times as much graphite as the entire EV industry expects to consume in 2022.
Benchmark describes the 2030 targets as "highly ambitious."
Tesla did not respond to a detailed request for comment.
The automaker, which rarely discloses its supplier relationships, began signing
offtake agreements with miners and refiners more than a decade ago, according to
former Tesla executives interviewed by Reuters, and currently has deals with
more than 20 materials suppliers around the globe
The raw material capacity needed to support Tesla's planned production in 2030
does not exist today, experts say.
Musk's sales target also depends on factors beyond Tesla's control.
Rival automakers are fielding more electric vehicles to compete with Tesla's
high-volume Model 3 sedans and Model Y SUVs.
In China, home-grown startups such as Xpeng Inc, Nio Inc and Li Auto Inc trail
Tesla in sales volume, but are growing rapidly.
China's BYD, which sells inexpensive electric and hybrid vehicles, is
challenging Tesla globally, while Ford Motor Co and Rivian Automotive Inc have
beaten Tesla to market with electric pickup trucks, a significant emerging
segment in North America.
Mike Tracy is skeptical of Musk's ability to develop a global manufacturing
juggernaut over the next eight years with nearly double the production capacity
of Toyota, currently the world's largest automaker by volume.
"That would be an extraordinary achievement, considering it's taken Toyota
decades to build that capability," he said.
(Reporting by Paul Lienert and Joe White in Detroit; Editing by Kevin Krolicki,
Ben Klayman and Matthew Lewis)
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