Autos

Graphite Might Be the Source of Tesla’s Next Headache

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By and large, electric vehicles are viewed as a “green” alternative to gasoline-powered internal combustion engines solely based on their nature of not having to use gas. There are arguments that say electric vehicles are essentially no better, given that the methods of production of electricity to charge them can be based on coal or other less-green sources (therefore displacing, not replacing, the vehicle’s carbon footprint). Data have suggested that the power source doesn’t equate to the same environmental damage that gasoline production yields.

There is another argument, though, that may hold more weight and is a key issue that EV makers will have to address as their cars grow in popularity: The battery cells used in them aren’t exactly constructed from “green” materials, and one in particular — graphite — is causing problems in China, where the vast majority of it is produced. Graphite isn’t an exclusive material to cars like Tesla’s (NASDAQ:TSLA) Model S or Toyota’s (NYSE:TM) Prius. It’s found in cell phones and any gadget that uses a lithium-ion battery cell. Cars, though, due to their sheer size, use plenty of it — about 110 pounds of graphite per vehicle.

Graphite pollution in China, caused by the mining and processing of the substance, has led the country to shut down a number of its mining sites and has polluted the air and water, caused damage to crops, and, naturally, raised health concerns.

“There’s little question that the Chinese are between a rock and a hard place environmentally,” Josh Landess, an advanced transportation analyst with Bloomberg New Energy Finance, told Bloomberg. “There’s an obvious irony that the disruption it’s causing is within the clean vehicle and transportation industry.”

China’s clampdown on graphite production is not unfounded, given the country’s abysmal problems with pollution and the health problems that it causes. However, as a result of being such a contributing force to the world’s economy, its actions could affect as much as a third of worldwide production, Bloomberg reports.

In turn, analysts see the costs of graphite growing — as much as 30 percent, some say. Others say even that rise would have an only minimal impact on the overall price of electric cars, though it could slow the expected long-term decline of battery prices, according to the news service.

Regardless, it’s a critical factor for Tesla, which is working fervently to ramp its production of Model S sedans while simultaneously working out its Gen-III vehicle, which will be Tesla’s first real mass-produced car. To help meet the demand for battery cells, Tesla will be constructing a $5 billion facility to exercise more control over its battery production and help support its product output.

Industrial Minerals analyst Simon Moores asserted to Bloomberg that Tesla’s factory alone could double demand for graphite in batteries, requiring the equivalent of six new mines to come into production. In turn, this makes China’s shutting down of graphite assets all the more troubling. Industrial Minerals adds that no significant new mines have been added outside China since the 1980s, though a mine will be opening up in Australia on concerns of China’s decline in graphite output.

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Brian Warshay, a New York-based analyst for Bloomberg New Energy Finance, said to Bloomberg that even a price hike for batteries would have a lesser impact on the overall vehicle. According to him, a 30 percent increase in graphite prices could increase the price of battery packs for electric vehicles by as much as 5 percent.

While electric cars use about 110 pounds of graphite per unit, hybrids, phones, and gadgets use far less. Hybrids use about 10 pounds, while e-bikes use 1 kilogram, laptops use about 100 grams, and mobile phones about 15 grams, per Anthony Pandolfo from Monash University’s department of materials engineering. Naturally, the latter — despite using less per unit — is manufactured in far greater quantities.