Tesla has signed a new deal with China’s Yahua Industrial Group for a supply of lithium carbonate.
The new supply agreement, set to begin in 2025 and extend through 2027, with a potential extension to the end of 2028, will see Yahua Lithium Ya’an, a wholly-owned subsidiary of Yahua Industrial Group, supplying Tesla with high-quality lithium carbonate, a crucial ingredient for producing lithium battery cathodes.
This deal follows a previous agreement between Tesla and Yahua for lithium hydroxide, initially signed in December 2020 and extended in August 2023 to run until 2030. Under this contract, Yahua is committed to supplying between 207,000 tonnes and 301,000 tonnes of lithium hydroxide to Tesla, reports Yicai Global.
For Tesla, securing this long-term supply agreement is a strategic move to support its production targets, particularly at Giga Shanghai. Additionally, this deal aligns with Tesla’s strategy to diversify its supply chain and reduce dependency on single-source suppliers.
Tesla’s strategy to diversify its lithium supply chain is crucial in the context of geopolitical challenges and market fluctuations. By partnering with multiple lithium suppliers, including Yahua, Tesla mitigates the risk of supply disruptions. This is particularly important given the US government’s recent policies under the Inflation Reduction Act (IRA), which incentivizes sourcing battery minerals from countries not labeled as “nations of concern.”
As a result, Tesla’s partnership with Piedmont Lithium in the U.S. for domestic lithium supply also plays a significant role in securing these subsidies.
Tesla is also building its own lithium refinery outside Corpus Christi, Texas. The facility expected to begin production this year.
