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Tesla’s 2020 success shows the future is battery metals

Tesla had a meteoric 2020, comfortably the most successful in its 17-year history, which bodes well for battery metals.

Tesla Inc - Tesla’s 2020 success shows the future is battery metals
In 2020 Tesla sold 499,550 vehicles, just short of a 500,000 target, but produced 509,737 cars, which was above target.

Tesla Inc (NASDAQ:TSLA) (FWB:TL0) went public in mid-2010, closing its debut day on the NASDAQ at US$3.84.

Its share price and market cap rose steadily over the next decade and closed 2019 at US$86.05 per share.

And while the demand for electric vehicles – and their constituent battery metals – has continued its inexorable rise over this time, no one could have foreseen Tesla’s meteoric rise in 2020, particularly given a global pandemic.

Yet despite all the odds, Tesla shares closed 2020 worth US$705.67 a pop – an eye-bulging 743 per cent gain year-on-year (and a modest 18,277 per cent gain on that first-day close back in 2010).

The reasons for this rise are obvious on the surface. Tesla makes the world’s most popular electric vehicles, which are in huge demand as governments around the world scramble to bring down carbon emissions to combat climate change.

The fourth quarter of 2020 was Tesla’s best quarter ever. It produced 179,757 cars and sold 180,570 of them.

For the 2020 calendar year, Tesla sold 499,550 electric vehicles, agonisingly shy of its target of 500,000, but it produced 509,737 cars, surpassing its target.

And while Tesla sales only account for around 3 per cent of total new car sales in the US, according to Stock Apps, it is the undisputed leader in electric vehicle sales – its' Model 3 and Model S are two of the best three selling electric vehicles globally of all time, with only the Nissan LEAF providing any sort of competition.

The case for battery metals

Tesla’s vehicles are powered by electric motors that use energy stored in rechargeable batteries.

Those rechargeable batteries use lithium, nickel and cobalt, commonly known as battery metals, as the primary ingredients for manufacture, while other metals such as manganese, vanadium, tungsten, copper, magnesium, iron and aluminium are also used.

The global markets for all of these metals have been growing rapidly over the past two decades and show no sign of slowing down.

According to Research and Markets, the global battery metals market was valued at US$11.3 billion at the end of 2019 but is projected to reach US$20.5 billion by 2027, growing at a rate of 8.2 per cent per year.

S&P Global reports that 2021 is expected to be a year of explosive growth in electric vehicles in China, predicting EV sales to rise as much as 40 per cent year-on-year.

In Europe, the European Commission is updating its battery legislation for the first time in 14 years as demand for clean, green technologies rises.

All of this spells very good news for the metals that make up batteries – and the companies that are mining those metals, as to meet demand, supply will need to significantly increase.

Australian opportunity

There is no shortage of Australian companies working hard to ensure battery metal supply will be able to match the sky-high demand, particularly in lithium.

Just in the past few weeks, Lithium Australia NL (ASX:LIT) (FRA:3MW) has raised nearly $1.3 million since mid-December, Core Lithium Ltd (ASX:CXO) is on the verge of starting construction at its Finniss Lithium Project in the Northern Territory, European Lithium Ltd (ASX:EUR) (FRA:PF8) (VSE:ELI) (NEX:EUR) has risen to two-year highs on the back of investor demand and Lake Resources NL (ASX:LKE) (OTCMKTS:LLKKF) has begun drilling as part of a DFS for its flagship lithium project in Argentina.

Meanwhile, nickel prices have been strong on the back of ever-increasing demand, while the cobalt price has been on a tear in the new year, rising to nearly US$38,000 a tonne.

Cobalt Blue Holdings Ltd (ASX:COB) (OTCMKTS:CBBHF) (FRA:COH) is one of Australia’s most prominent cobalt plays and is on the verge of a big year as it progressively develops its Broken Hill Cobalt Project, beginning with a pilot plant which is on track to begin producing large samples this quarter.

- Daniel Paproth

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