Tesla signs long-term lithium hydroxide supply deal with China’s Yahua

Tesla has signed a long-term lithium hydroxide supply deal with China’s Sichuan Yahua Industrial Group, according to the latter.

The Chinese group disclosed the 5-year supply agreement in a filing to the Shenzhen Stock Exchange today.

Reuters reports:

“Yahua, which is based in southwest China’s Sichuan province, did not provide tonnage figures but, in a filing to the Shenzhen Stock Exchange, put the total value of the contract at $630-880 million over 2021-25.”

Lithium hydroxide is used in the production of battery cells.

Tesla recently announced its plan to produce its own battery cells, but the automaker has also been securing lithium supply for its battery manufacturers prior to planning to build its own batteries.

Back in 2018, the automaker signed a 3-year supply agreement China’s Ganfeng Lithium with a possible 3-year extension.

This new supply deal with Yahua is only one of many that Tesla signed as it attempts to secure large quantities of lithium to support its ambitious growth plans.

The automaker also previously secured a deal to get lithium from Australia and signed a lithium supply agreement with a North Carolina mining project that is still in development.

On top of those supply agreements, Tesla also recently announced plans to mine lithium itself starting with claims on 10,000 acres that they acquired in Nevada earlier this year.

The company is developing its own extraction technique, but Tesla is expected to still heavily rely on lithium suppliers long-term.

With its new 4680 battery cells, Tesla is planning to achieve several terawatt-hours of battery capacity production per year by the end of the decade.

This would require a massive increase in lithium production, as well as other critical resources, like nickel.