Tesla has inked a renewed contract with China’s Yahua Industrial Group, extending the supply of lithium for its electric vehicle batteries until 2030. The extended agreement includes a substantial increase in the quantities supplied compared to the previous contract.
Under the newly extended contract, Yahua will provide Tesla with 207,000 to 301,000 tonnes of battery-grade lithium hydroxide from 1 August 2023 to 31 December 2030. This marks a considerable boost from the original contract, which covered 63,000 to 88,000 tonnes over a five-year period until 2025. Notably, the supply volume of up to 301,000 tonnes represents the entire contract period, encompassing the extension from 2025 to 2030.
The wide range of supplied quantities (94,000 tonnes) is attributed to a framework agreement rather than a fixed supply arrangement. Yahua stated that the supply volume and prices for each year during the contract period will be determined through mutual agreement. Tesla holds a significant position as one of Yahua’s major customers, accounting for 17% of the Chinese company’s total sales, as per their financial report.
The price of lithium hydroxide ex-works reached a record high, peaking at up to 73,000 euros per tonne (equivalent to 571,000 yuan) according to Argus. However, on 1 August 2023, the price per tonne decreased to 250,000 to 275,000 yuan (around 32,000 to 35,200 euros). Considering the current price and maximum agreed delivery quantity, the calculated order value stands at 10.6 billion euros. Nonetheless, given the flexible nature of price and quantity agreements, the actual sum could vary significantly.
Currently, Yahua produces up to 73,000 tonnes of lithium salts annually at its plant in Sichuan province, including battery-grade compounds like lithium hydroxide and lithium carbonate. By the end of 2025, the production capacity is set to more than double, reaching 173,000 tonnes. Lithium hydroxide primarily serves as a crucial component in the production of NCM/NCA batteries, hinting at Tesla’s probable use in their long-range and performance variants.
Apart from Tesla, Yahua also counts Korean battery manufacturers SK and LG among its clients. SK New Energy, the Chinese branch of SK, is set to receive 20,000 to 30,000 tonnes of lithium hydroxide from Yahua between 2023 and 2025. Similarly, LG Energy Solution will obtain up to 30,000 tonnes during the same period. Moreover, in April of this year, LG Energy Solution and Yahua struck a deal for lithium hydroxide production in Morocco.
