Tesla has once again found a way to increase the value of its stock. What is it?

Elon Musk is famous for his desire not to rely too much on external suppliers and instead produce everything himself. Therefore, all the car parts and other necessary hardware are produced exclusively in factories owned by the American carmaker. However, Tesla has uniquely unveiled a plan to take this independence one step further.

Tesla Supercharger

According to a letter sent to the Texas Comptroller's Office, Tesla $TSLA-4.0% plans to build its own lithium battery refining plant on the Gulf Coast to produce lithium hydroxide ready to be shipped to Tesla battery factories in the U.S.

Tesla will mine its own lithium

Elon Musk has previously said that "lithium prices are unsustainable in the long term" and Tesla may have to go into mining and refining itself if costs don't improve. According to the latest data, the price of lithium has risen by more than 256% in the last year! Ensuring a steady supply of battery components is crucial for Tesla as it faces stiff competition in the rapidly growing EV market.

The potential battery-grade lithium hydroxide refining facility, which Tesla has touted as the first of its kind in North America, will process "raw ore material to a battery-grade state," the company said in an application filed with the Texas Comptroller's Office.

Annual Lithium Price Chart

Efforts to diversify lithium supply

The move by Tesla is also likely an effort to diversify its lithium supply. Lithium is a critical metal for batteries, which are used in everything from electric cars to smartphones. Given the strategic importance of the metal and its Chinese-dominated mining, there have been concerns in Washington that Beijing could cut off critical supplies of lithium and other matrials. Australia, Chile and China are the three largest lithium producers, but China leads the lithium refining industry by a wide margin, controlling more than half of the world market. By contrast, efforts by the United States and the European Union to create competing projects have so far faced a series of setbacks.

Lithium prices have rocketed this year, mainly due to rising demand from the automotive sector. If Tesla's plan goes ahead, the carmaker could become the first in the sector to invest directly in lithium refining.

If the plan is approved, construction could begin in the fourth quarter of 2022 and commercial production would start by the end of 2024, Tesla said in an Aug. 22 filing.

DISCLAIMER: All information provided herein is for informational purposes only and in no way constitutes an investment recommendation. Always do your own analysis.

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