Issue link: http://resourceworld.uberflip.com/i/832998
54 www.resourceworld.com J U N E / J U L Y 2 0 1 7 T ony Seba's excellent You Tube video, Clean Disruption – Why Energy & Transportation will be Obsolete by 2030 – (Oslo, March 2016), covers the concept of tipping points and expands on the concept of our society being on the cusp of a revolution in energy and transportation. It explains that new developments in solar panels, lithium ion batteries, electric cars and autonomous driving are simultaneously converging to create a shift away from oil and towards electricity to power self-driving cars, charged on smart grids, using power from solar renewable energy. Resource World readers, however, are mostly interested in any new opportunities in resource stocks stimulated by this shift. At the centre of this are Elon Musk and his revolutionary Tesla cars, Powerwall batteries, and solar panels. Musk has disrupted the automobile industry by launching electric cars with performance characteristics so good that they broke Consumer Reports reporting scale for cars by scoring a perfect 100. Tesla Inc. [TSLA- NASDAQ] did this by delivering incredible performance at the same time as delivering unbelievable economy, handling, comfort and interior space. Musk's Tesla is now ramping up its Nevada-based Gigafactory to produce bat- teries, in joint venture with Panasonic, to power its mass market Model 3. It is reported that this factory will produce more lithium ion batteries than all the other battery plants in the world at this point in time. We have been researching the implications of this massive develop- ment on the inputs to battery manufacture for resource stocks. Will it impact oil prices? Not much in the near term. The global market for electric cars is only 1% of total vehicle sales so even dramatic growth will not change oil demand in the near term. What about lithium? Lithium is just the butter on the bread of the lithium ion battery sandwich with the lithium ions shuttling back and forth between the anode and the cathode. Lithium is not the most expensive part of the battery or even the largest component in the battery. Moreover, though there may be some bottlenecks in the supply of high spec pure lithium, there are abundant lithium resources around the world. What other materials will be most affected? There will be increased demand for graphite, cobalt and nickel. Can Tesla possibly change the automobile industry in a disruptive way? Yes, if Tesla can drive the cost of batter- ies down to about $125 per kilowatt hour of capacity, then according to the US Department of Energy, electric cars could be more economic than ICE cars (inter- nal combustion engine). General Motors recently announced that the battery pack in its electric car, the Chevy Bolt costs $145 per kilowatt hour of capacity as supplied by LG Chem of Korea. So we are nearing the threshold of economic viability for mainstream electric cars if prices continue to trend lower. There are other barriers to electric car adoption such as charging time, range, convenient charging stations and degrada- tion but let us focus on the raw material inputs. We have looked at lithium, graphite and manganese and don't think that these will be obstacles to Elon Musk's desire for widespread adoption of electric cars, but we think that cobalt is a conundrum. Why? Because cobalt is a by-product of nickel and copper mining, it is not a primary product and supply will not respond to increasing demand in an elastic way. Cobalt is primarily sourced from the Tipping Points and Tesla's battery dilemma by Alf Stewart Two examples of the Tesla Model 3 electric car which are powered by lithium-ion batteries. Source: Tesla Motors.