Tesla Motors (TSLA) to Get Materials for Gigafactory in North America

Tesla Motors Inc (NASDAQ:TSLA) plans to obtain all the materials it needs for its Gigafactory battery in North America, according to report from Bloomberg.

The electric car manufacturer will not look for suppliers of cobalt, graphite, and other materials needed for its Gigafactory overseas, according to its spokesperson, Liz Jarvis-Shean.

In an e-mailed statement, Jarvis-Shean said, “It will enable us to establish a supply chain that is local and focused on minimizing environmental impact while significantly reducing battery cost.” According to her, Tesla Motors Inc (NASDAQ:TSLA) intends to reduce the per-kilowatt hour cost of its batteries by 30% and to cut logistics waste.

Jarvis-Shean added that Tesla Motors Inc (NASDAQ:TSLA) currently obtains a “vast majority” of the graphite—a major component in lithium-ion battery—from Japan and Europe. According to her, the graphite is synthetic and not mined. She emphasized that the electric car manufacturer prefers synthetic graphite.

Edward R. Anderson, CEO of consulting firm TRU Group Inc described the plan of Tesla Motors Inc (NASDAQ:TSLA) “very patriotic.” He also noted that the current costs of the electric vehicles are “quite high.”

Navigant Research analyst, Sam Jaffe commented that the purchasing strategy of the electric car manufacture is uncommon in the battery industry. Tesla Motors Inc (NASDAQ:TSLA) need to rely on graphite mines in Canada that are needed to be built yet, and to look for other prospective supplies of cobalt in Minnesota and Idaho to realize its plan, according to some analysts in the industry.

Jaffe believed that the target of the electric car manufacturer in sourcing raw materials is the costs and pollution associated in the metals industry. Currently, Tesla Motors Inc (NASDAQ:TSLA) is getting its cobalt from the Philippines through Sumitomo Metal Mining Co. Ltd. (TYO:5713), which started its nickel-cobalt mining operations in the country last year.

Stephen English, a cobalt trader at SFP Metal in London said the global demand for cobalt is increasing annually by 5% or more but there are only a few possible new sources such as Congo.

The United States has not done any cobalt mining since 1971. According to the U.S. Geological Survey, there are still 301 tons of cobalt in the government stockpile. Tesla Motors Inc (NASDAQ:TSLA) could tap Formations Metals Inc. (TSE:FCO) as a potential supplier because it is developing a cobalt mine in Idaho. Formation Metals spokesperson Rick Honsinger said the company plans to present its “ethically sourced” cobalt to the electric car manufacturer to avoid the political risks of Congolese metal.

Last month, Tesla Motors Inc (NASDAQ:TSLA) revealed that its $5 billion battery Gigafactory is designed to produce sufficient rechargeable lithium-ion batteries to power 500,000 electric cars annually by 2024. The electric car manufacturer said the total land area needed for its Gigafactory is around 500 to 1,000 acres and it would create approximately 6,500 jobs.

Tesla Motors Inc (NASDAQ:TSLA) has not yet selected a location for its Gigafactory, but it is considering four states including Arizona, Nevada, New Mexico, and Texas.