Tesla's Global Lithium Strategy: Securing Supply from the World's Major Lithium Mines

As the energy transition reshapes global industries, Tesla has moved strategically to lock in critical raw materials from the world’s major lithium mines and producers. Lithium has become one of the most scrutinized commodities in the race to electrify transportation, with CEO Elon Musk consistently emphasizing the company’s need to establish long-term supply contracts amid volatile market conditions.

Understanding the Global Lithium Landscape

To understand where Tesla sources its lithium, it’s essential first to grasp the geography of global lithium mining. The world’s lithium mines are concentrated in just a handful of regions. Australia dominates with hard-rock spodumene deposits, while Chile’s Atacama Desert provides brine-based lithium extraction. Argentina, positioned within the prolific Lithium Triangle of South America, has emerged as the fourth-largest lithium producing nation globally. However, despite these mining operations, a critical bottleneck exists: China controls approximately 72 percent of global lithium processing capacity as of 2022, giving it enormous leverage over refined battery-grade materials.

This geographic concentration creates both opportunity and risk. In spring 2024, Musk visited Argentine President Javier Milei at Tesla’s Austin factory to discuss potential lithium investment opportunities in Argentina—a clear signal of Tesla’s intent to diversify sourcing across multiple continents and tap into the world’s most productive lithium mining regions.

Tesla’s Multi-Source Supply Network

Rather than relying on a single supplier, Tesla has constructed a complex web of lithium supply agreements with various producers working across the world’s major lithium mines and processing facilities.

Established Partnerships:

Tesla’s three-year lithium supply deal with Ganfeng Lithium, one of the world’s leading lithium producers, began in late 2021. Ganfeng commenced deliveries in 2022 and continues as a core supplier. Arcadium Lithium, a major mining company poised to be acquired by Rio Tinto, maintains active supply contracts with the EV manufacturer. China’s Sichuan Yahua Industrial Group holds multiple agreements—an existing contract through 2030 for battery-grade lithium hydroxide and a newer arrangement finalized in June 2024 to supply lithium carbonate between 2025 and 2027.

Expanding the Geographic Footprint:

Liontown Resources is supplying Tesla with lithium spodumene concentrate from its Kathleen Valley project in Australia—one of the world’s major lithium mines currently under development. The initial five-year supply agreement commenced in 2024, with production beginning in July. Piedmont Lithium, which amended its agreement with Tesla in January 2023, provides spodumene concentrate from its North American Lithium operation (a joint venture with Sayona Mining), with deliveries extending through the end of 2025.

This multi-regional approach ensures Tesla isn’t dependent on any single lithium mine or country, mitigating geopolitical and supply chain risks.

The Battery Chemistry Puzzle: Rethinking Lithium Requirements

Not all Tesla batteries consume lithium in equal measure. The company employs several cathode chemistries, fundamentally changing the mineral intensity of its powertrains.

Tesla historically favored nickel-cobalt-aluminum (NCA) cathodes developed by Japanese supplier Panasonic—a chemistry offering high energy density with reduced cobalt content. For example, a standard Tesla Model S powered by an NCA battery (weighing approximately 1,200 pounds) contains roughly 138 pounds of lithium. South Korea’s LG Energy Solutions provides batteries using nickel-cobalt-manganese-aluminum (NCMA) chemistry.

However, Tesla’s strategy has shifted markedly toward lithium-iron-phosphate (LFP) cathodes, which eliminate both cobalt and nickel. As Musk noted back in 2016, lithium comprises roughly only one-tenth of a typical battery’s material composition—he famously called it “the salt in your salad.” The real volume pressure comes from the sheer quantity of batteries needed to meet manufacturing targets. By 2030, demand for lithium-ion batteries is forecast to grow by 400 percent to reach 3.9 terawatt-hours, according to Benchmark Mineral Intelligence, while the current global lithium surplus is expected to evaporate.

From Mining to Refining: Tesla’s Strategic Pivot

Rather than pursuing ownership of lithium mines themselves—a capital and expertise-intensive undertaking—Tesla has chosen to develop in-house refining capabilities. The company broke ground in 2023 on a Texas lithium refinery in the greater Corpus Christi area. This facility is designed to produce 50 gigawatt-hours of battery-grade lithium annually, shifting Tesla’s positioning from a buyer of raw materials to a processor of refined products.

As of early 2026, this refinery has achieved full production capacity. Additionally, Tesla has commenced manufacturing LFP batteries at its Sparks, Nevada facility, with initial capacity of approximately 10 gigawatt-hours. The move partly responds to Biden Administration regulations emphasizing domestic battery material sourcing. CATL, the Chinese battery giant, has supported this transition by selling idle equipment to Tesla for use at the Nevada plant.

Tesla’s broader battery energy storage systems (BESS) factory in China—which commenced production in late 2024—relies on LFP chemistry supplied collaboratively by CATL (covering 80 percent of supply) and BYD Company (providing 20 percent), further diversifying the technology stack and reducing singular lithium dependency.

The Strategic Choice: Why Refining Matters More Than Mining

Industry executives have offered compelling arguments about the distinction between mining and refining. According to Felipe Smith of SQM, a major Chilean lithium producer, automakers entering the mining business face prohibitive technical challenges: “You have to build a learning curve—the resources are all different, there are many challenges in terms of technology—to reach a consistent quality at a reasonable cost.”

Yet Simon Moores from Benchmark Mineral Intelligence presents a counterargument: OEMs may eventually need to secure interests in up to 25 percent of major lithium mining projects to guarantee supply, even if they don’t operate mines directly. What’s clear is that traditional supply contracts alone may prove insufficient.

Tesla’s decision to focus on refining aligns with Musk’s public statements—the company intends to control the downstream processing of lithium rather than venturing into extraction. This approach allows Tesla to add value while leveraging its engineering expertise without requiring the geological and operational knowledge that mining demands.

The Road Ahead: Supply Challenges and Market Dynamics

Market conditions have shifted considerably since 2020-2021 when lithium prices reached all-time highs. By 2024, prices had entered a sustained decline, with EV battery costs at record lows. Goldman Sachs research projected a 40 percent decline in EV battery costs between 2023 and 2025, improving cost competitiveness with internal combustion vehicles.

However, longer-term structural challenges loom. As Tesla scales production toward its multi-million-unit ambitions and competitors race to electrify, the world’s lithium mines cannot be divorced from the broader competitive landscape. During the 2024 US presidential election, Musk’s support for Donald Trump—a figure historically critical of EV subsidies—created market uncertainty, though Trump’s subsequent election has reportedly favored larger, established players like Tesla over smaller competitors.

The Texas water supply situation illustrates the real-world complexities: Tesla’s refinery required 8 million gallons of water daily, but South Texas faced severe drought conditions. In December 2024, the South Texas Water Authority approved an infrastructure agreement allowing water supply rights critical to the project’s viability—a reminder that securing lithium supply extends beyond mining geographies to encompassing water availability, energy costs, and local infrastructure.

For investors and industry observers, the takeaway is that Tesla’s lithium sourcing strategy represents a sophisticated balancing act: diversifying suppliers across Australia, Chile, Argentina, and China; investing in downstream refining rather than mining; and adapting battery chemistry to reduce mineral intensity. As demand for lithium grows exponentially toward 2030, access to the world’s major lithium mines and competitive positioning in refining will determine which OEMs thrive in the electrified future.