Tesla Battery Day and Australia’s listed lithium producers, what happened?

30 September 2020

Telsa’s (NASDAQ:TSLA) Battery Day was supposed to be the cherry on top for the rally lithium producers have been experiencing over the last couple of years. Demand for lithium in the near-term was widely expected to be confirmed as Tesla discussed its battery technology and presented its outlook on its own lithium demands. Lithium, being the essential ingredient in the current form of electric vehicle batteries, has seen a significant rally as part of the hype surrounding the transition to electric, and renewable, vehicles. Due to the close trading relationship between the United States and Australia, many investors believed ASX-listed lithium producers, like Galaxy Resources (ASX:GXY), Orocobre (ASX:ORE) and Pilbara Minerals (ASX:PLS) would be large benefactors as demand began to ramp up. However, by the end of the day, shares of the three companies were down 11.6%, 6.5% and 6.8%, respectively. So, the question is, what happened?

Two unexpected, negative, pieces of information emerged from Tesla’s Battery Day. The first was the unexpected news that many of the massive improvements to the cost and efficiency of Tesla’s batteries that had been hyped would take three-years to fully materialise. The second was that Tesla would only be purchasing lithium from mines inside the United States due to the immense abundance of lithium deposits. To quote Elon Musk, “it’s important to note that there is a massive amount of lithium on earth. Lithium is not like oil – there’s a massive amount of it pretty much everywhere.”

There was one ASX-listed lithium producer that benefited from Tesla’s Battery Day, however. A few days after the event Piedmont Lithium (ASX:PLL) announced that it had secured a contract with Tesla to sell a third of its expected spodumene concentrate extracted from its Nevada mine over the next five-years. This spodumene concentrate contains, on average, between 6-7% lithium carbonate concentrations. This is a huge win for Piedmont Lithium and the company’s share price accordingly sky-rocketed around 153% between its opening price of $0.15 on 28 September and end of day 29 September 2020.

The era of the electric vehicle is here. However, many uncertainties remain, like will the batteries be lithium-ion? The only thing investors can say for certain is that the era of petroleum powered vehicles has an expiration date that the current generation will live to see. We believe there will be many winners, but even more losers during this transition. But one thing is certain; there is plenty of money to be made. Investors’ best weapon is to stay as informed as possible, you never know when a random piece of information could make you a fortune.