Tesla's Global Lithium Supply Chain: How the EV Maker Secures Battery Materials Across Multiple Continents

Tesla’s rise as a leading electric vehicle manufacturer depends heavily on its ability to secure reliable lithium supplies—the critical metal that powers modern EV batteries. As prices have stabilized after hitting historic highs in 2021-2022, the company has shifted from panic buying to strategic portfolio building, working with battery manufacturers and suppliers across Asia, North America, and South America to build a resilient supply network.

The Current State of Lithium Pricing and Market Dynamics

When lithium prices spiked dramatically in the early 2020s, Elon Musk publicly acknowledged the crisis. Speaking during a mid-2023 earnings call, he remarked that “lithium prices went absolutely insane there for a while.” By 2024, however, the market had reversed course, with prices declining as EV sales growth slowed across major markets due to economic headwinds and rising interest rates. This correction has had a silver lining: according to Goldman Sachs research, EV battery costs have reached record lows and are projected to fall another 40 percent between 2023 and 2025.

Lower battery costs directly benefit consumers, bringing electric vehicles closer to price parity with traditional combustion engines—a threshold that industry analysts believe will unlock mass-market adoption. Yet this favorable pricing environment masks a deeper structural challenge: securing consistent supply remains critical, especially as global EV production continues expanding.

Building a Diversified Supplier Portfolio

Tesla’s approach to lithium supply reflects lessons learned during price volatility. Rather than relying on a single source, the company has cultivated relationships with multiple suppliers operating at different stages of the value chain.

Major Supply Agreements:

At the end of 2021, Tesla signed a three-year lithium supply contract with Ganfeng Lithium, one of the world’s largest lithium producers. The Chinese company commenced deliveries to Tesla in 2022. Separately, Arcadium Lithium—a major mining operation now slated for acquisition by Rio Tinto—maintains active supply contracts with the EV maker.

China’s Sichuan Yahua Industrial Group represents another critical partnership. Under an agreement finalized in June 2024, Yahua committed to supplying Tesla with lithium carbonate between 2025 and 2027, with an option to extend through 2028. Additionally, Yahua had previously agreed to supply battery-grade lithium hydroxide through 2030.

North American suppliers complement these Asian partnerships. Liontown Resources is poised to supply spodumene concentrate from its AU$473 million Kathleen Valley project in Australia, with deliveries beginning in July 2024 under an initial five-year arrangement. Piedmont Lithium, through its North American Lithium joint venture with Sayona Mining, supplies spodumene concentrate under a contract running through 2025.

These direct mining relationships are only part of the story, however. Tesla also works with battery manufacturers including Panasonic and CATL, who themselves negotiate separate lithium supply agreements with chemical refineries—creating a layered supply chain that distributes risk but also introduces complexity.

Battery Technology Divergence: NCA, NCMA, and the LFP Revolution

The composition of Tesla batteries has evolved significantly, directly affecting lithium demand profiles. Tesla vehicles have historically relied on nickel-cobalt-aluminum (NCA) cathodes developed by Japanese partner Panasonic. This chemistry delivers higher energy density and represents a lower-cobalt alternative to the industry-standard nickel-cobalt-manganese (NCM) formulation.

South Korea’s LG Energy Solutions supplies Tesla with batteries using nickel-cobalt-manganese-aluminum (NCMA) cathodes—a more advanced variant requiring different material ratios.

In 2021, Tesla shifted its standard-range vehicle production toward lithium-iron-phosphate (LFP) cathodes, eliminating cobalt and nickel entirely from those models. China’s CATL began supplying LFP batteries for Shanghai-manufactured vehicles starting in 2020, and this relationship has expanded. Additionally, BYD Company supplies Tesla with Blade batteries—a compact LFP design—for certain European models, while also partnering on battery energy storage systems (BESS) for China operations.

By early 2024, Tesla announced plans to manufacture LFP batteries at its Sparks, Nevada facility in response to Biden Administration regulations on battery material sourcing. CATL agreed to sell idle equipment to support this expansion, giving the Nevada plant an initial capacity of approximately 10 gigawatt hours.

Understanding Lithium Content in Tesla Batteries

The actual amount of lithium in a Tesla battery varies based on chemistry and pack size. A standard Tesla Model S, equipped with a 1,200-pound (544-kilogram) NCA battery pack, contains approximately 138 pounds (62.6 kilograms) of lithium.

Notably, lithium comprises only about one-tenth of total battery material by weight—Musk has famously compared it to “the salt in your salad.” Nickel and graphite actually constitute larger portions of battery chemistry. However, volume remains the decisive factor: given the sheer scale of Tesla’s production ambitions and industry-wide EV ramp-ups, even modest per-unit lithium requirements translate into enormous aggregate demand.

Benchmark Mineral Intelligence forecasts that lithium-ion battery demand will surge 400 percent by 2030, reaching 3.9 terawatt-hours annually. Over the same period, the current lithium surplus is expected to evaporate, creating potential supply constraints unless mining and refining capacity expands accordingly.

Tesla’s Refining Strategy Versus Mining

While some speculated that Tesla might pursue direct lithium mining, company leadership has clarified its priorities differ. Musk has signaled that Tesla intends to develop in-house refining capabilities rather than become a miner. As Felipe Smith from major lithium producer SQM noted, “You have to build a learning curve—the resources are all different, there are many challenges in terms of technology to reach consistent quality at reasonable cost. It’s difficult to see that an original equipment manufacturer with a completely different focus will really engage into these challenges.”

However, industry analyst Simon Moores from Benchmark Mineral Intelligence argues that automotive manufacturers may be forced toward partial mining involvement regardless: “They are going to have to start buying 25 percent of these mines if they want to guarantee supply—paper contracts won’t be enough.”

Tesla’s Texas Lithium Refinery: The Path Forward

Tesla’s commitment to refining became concrete when the company broke ground on an in-house lithium refinery in the Corpus Christi area of Texas in 2023. Once operational, the facility is designed to process battery-grade lithium at 50 GWh per year, with full production anticipated in 2025.

The project encountered a significant hurdle: South Texas faces chronic drought conditions, and securing 8 million gallons of daily water supply proved challenging. This obstacle eased when the South Texas Water Authority approved an infrastructure agreement in December, allowing Nueces Water Supply to provide the pipeline access Tesla required—a critical resolution that unblocked the project timeline.

Geopolitical Context: Lithium’s Global Landscape

The battle for lithium supply extends beyond corporate negotiations. Argentina, Chile, and Australia dominate global lithium mining, with Argentina and Chile forming key segments of the so-called “Lithium Triangle.” In spring 2024, Musk met with Argentine President Javier Milei at Tesla’s Austin factory to explore investment opportunities in Argentina’s lithium sector—a move signaling Tesla’s geographic diversification strategy.

China, meanwhile, controls 72 percent of global lithium refining capacity as of 2022, creating a structural bottleneck independent of mining volumes. This refining dominance explains Tesla’s push to build domestic U.S. refining infrastructure, reducing reliance on Chinese processing facilities and mitigating geopolitical supply risks.

The Broader Industry Challenge

Tesla’s multi-pronged approach to lithium procurement reflects broader industry dynamics. EV battery manufacturers worldwide face similar pressures, though Tesla’s scale and financial resources provide advantages. As the energy transition accelerates and electric vehicle adoption becomes mainstream, competition for lithium supplies will intensify—making strategic supplier relationships, technological innovation in battery chemistry, and domestic refining infrastructure increasingly valuable competitive advantages.