Tesla to Boost EV Battery Production with New Lithium Refinery in Texas

The article outlines Tesla's establishment of a Texas lithium refinery to produce essential battery materials, supporting domestic supply chains and reducing dependence on Chinese processing, thereby strengthening its EV market presence.

Faheem Hassan

12/14/20231 min read


Tesla, the largest manufacturer of electric vehicles (EVs) in the United States, is developing a new type of refinery—a lithium refinery—on the Gulf Coast near Corpus Christi, Texas. The plant will produce battery-grade lithium hydroxide, a lithium chemical used in the high-performance lithium-ion batteries that companies such as Tesla prefer. Once operational, the refinery will be one of just a few facilities in the U.S. that produce this chemical. The new refinery will provide Tesla with domestic supplies of refined lithium and capitalize on the 2022 Inflation Reduction Act’s subsidies for EVs. Lithium is a key input in the batteries that power EVs.

The refinery will most likely process spodumene concentrate to produce lithium hydroxide for its batteries. Tesla has entered into a contract with Piedmont Lithium to purchase spodumene concentrate from Piedmont’s North American Lithium project in Quebec. The joint venture with Sayona Mining is expected to begin production this year.

The location of the refinery means it will be well-positioned from both upstream and downstream perspectives. It will have convenient access to the Gulf of Mexico to receive feedstock and other inputs. Downstream, the facility will have the ability to ship its output to Tesla’s Gigafactories in the U.S., including the Giga Texas plant in Austin.

Processing plants that produce battery-grade lithium hydroxide are relatively rare in the U.S., with only two currently operating. Such capacity is concentrated in China, which also dominates many other areas of the lithium-ion battery supply chain. This concentration is due in part to Chinese government policy, which has prioritized investment in the EV and battery supply chains, and in part to favorable economics.

In conclusion, Tesla’s new lithium refinery in Texas represents a significant step towards securing domestic supplies of refined lithium and capitalizing on the 2022 Inflation Reduction Act’s subsidies for EVs. The refinery’s strategic location and processing capabilities will help Tesla reduce its reliance on Chinese processing plants and strengthen its position in the EV market.