Elon Musk Warns That Tesla's Cobalt Use Is Heading Toward Zero

(Bloomberg) -- Tesla Inc. boss Elon Musk delivered a one-two punch for anyone betting on cobalt to continue its record-breaking rally, and some good news for nickel fans.

The maker of electric vehicles said in a letter to shareholders it has slashed its reliance on cobalt for its Model 3 vehicle, while raising nickel content, and that its latest batteries already employ less cobalt than similar types already on the market. On a conference call with analysts, Musk went further.

“We think we can get cobalt to almost nothing,” the carmaker’s chief executive officer said in response to a question on reducing battery costs.

Elon Musk Warns That Tesla's Cobalt Use Is Heading Toward Zero

Cobalt prices have exploded to the highest in a decade as companies including Tesla strive to bring electric vehicles into the mainstream, with supply largely dependent on a few mines in the politically volatile Democratic Republic of Congo. Nickel, which has gained about 50 percent over the same two-year span, is more widely available and, for now, cheaper. A shift to nickel-rich batteries is happening faster than expected, according to BHP Billiton Ltd., the world’s biggest miner.

Tesla has worked on reducing cobalt usage “for literally several years now, and this has been extremely helpful in the overall cost per kilowatt hour, especially with recent commodity price movements,” Jeffrey Straubel, Tesla’s chief technology officer, said on the call.

While the weight of its Model 3 is on par with gasoline-powered counterparts, its battery cells are of the highest energy density used in any electric vehicle, the Palo Alto, California-based company said Wednesday in the letter. “We have achieved this by significantly reducing cobalt content per battery pack while increasing nickel content and still maintaining superior thermal stability,” Tesla said.

Tesla says the cobalt content in its nickel-cobalt-aluminum cathode chemistry is already lower than next-generation cathodes that will be made by other cell producers with a nickel-manganese-cobalt ratio of 8:1:1.

“The incentive is for chemists to reduce costs as much as possible, and that’s what’s happening right now,” Ken Hoffman, client development executive at McKinsey & Co., said in an interview in Shanghai in April. “It’s the old adage that high prices is the cure for high prices.”

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