Tesla's Truckload

Tesla’s (TSLA:  Nasdaq) newest vehicle introduction is an all-electric heavy-duty semi-truck capable of hauling a payload of as much as 80,000 pounds for a distance of as many as 500 miles on a single charge.  The design has a steamlined design, but otherwise looks quite conventional.  Even with the efficient design that helps reduce wind drag, the truck will require a very large battery to get to mile 500. 

Shortly after Tesla’s truck announcement, Bloomberg New Energy Finance published an estimate that the truck would need battery capacity between 600 kilowatt hours and 1,000 kilowatt hours.  At the midpoint of this range a 800 kilowatt hour battery could weigh as much as 10,000 pounds and cost more than $100,000.  Tesla has priced the truck at $180,000, leaving $80,000 for the truck body.  Of course, improvements in battery technology such as the metal air technology could reduce the battery cost while offering an equivalent power.  The first Tesla trucks are not expected to come to market until late 2019.  Metal air batteries are expected to be more efficient and powerful than current electric vehicle batteries, but they are not likely to be available in time for Tesla’s first trucks.

No matter how investors look at it, widespread adoption of electric trucks will require a truckload of resources to produce the batteries.  Tesla’s most advanced battery for the Model S car is a 100 kilowatt hour battery.  It is composed of a series of 24 volt battery packs, each of which contains 516 individual battery cells.  The 100 kwh battery offers faster acceleration and longer driving time on a single charge compared to its predecessor.

Acceleration power and long driving time are certainly critical requirements for a truck battery.  No doubt Tesla will continue to seek efficiency in its battery.  In the meantime, investors can look at the 100 kwh battery as guidance for investment opportunities beyond Tesla itself.

Of course, lithium is at the top of the list among materials required for a vehicle battery.  The big 100 kwh battery is estimated to require as much as 110 kilograms of lithium.  There is a wide range of lithium carbonate prices from $20,000 from China sources to $10,000 from other sources.

About 80% of the cathode in the Model S battery is composed of nickel and another 15% is cobalt and the last 5% is aluminum.  The nickel requirement is around 55 kilograms for the Model S battery.  That is quite a bit of material, but with nickel trading around $10,000 per ton it is among the lowest-cost of the required metals. 

Only a pinch of aluminum is needed, and since it costs about $1,600 per ton it does not represent significant cost or sourcing issues.  Cobalt is another matter.  It is the priciest of the required metals at $27,000 per ton.  The 100 kwh battery requires an estimated 22 kilograms of cobalt.   

The most significant battery material is graphite for the anode battery component.  Indeed, Tesla’s CEO, Elon Musk, has joked that the Model S battery should be called a nickel-graphite battery and not a lithium ion battery.  The 100 kwh battery is estimated to require as much as 68 kilograms of graphite.  Battery grade graphite sells for around $10,000 per ton, but unrefined graphite material can be had for around $3,500 per ton.

In the next few posts look at companies that supply the electric vehicle battery manufacturers with materials. Their stocks represent alternatives for investors who want a bite from the electric vehicle apple.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.