Elon Musk Misses the Big Picture on Lithium Mining

Elon Musk has a suggestion for entrepreneurs: Get into lithium mining for juicy margins. It’s a pithy recommendation, but it fails to grasp the complicated challenges for producing more of the metal.

Soaring lithium prices have dampened the excitement around electric vehicles. Musk noted that the production of the white metal was the biggest “limiting factor” for EVs. That may be true — along with all the other battery supply chain bottlenecks — but just mining more lithium or buying a mine isn’t the solution.

As the gap widens between supply and demand for the metal, prices have been rising for everything from the ore of lithium, spodumene, to lithium carbonate and a more refined form, lithium hydroxide. Mexico has nationalized lithium production, and Chile, home to some of the largest mines in the world, is moving closer to doing so as well. China is keeping a tight lid on prices and pushing them down to ensure its companies don’t suffer setbacks. The US is trying to find ways to expand lithium supply.

Yet no solutions to close the gap — and make widespread adoption of EVs a reality — are readily emerging. Part of that is because mining, more broadly, has acquired a bad reputation over the years and was dumped in the non-ESG investor bucket. That meant a lack of investment in refining technologies, and companies have been put at a disadvantage. They’re now gearing up to deal with surging raw material demand — much sooner than they expected — and supply chain snarls. But the methods and processes haven’t fully evolved.

In addition, the crucial divide between technologies for EV batteries — those that are proving viable (lithium iron phosphate) versus those that still have a way to go but are more energy dense (nickel cobalt manganese) — is adding pressure. More widely used technologies are increasing demand for more basic raw materials, especially out of China. Demand for these cathode materials is expected to account for a relatively constant portion — about 25% — of total demand from passenger car and commercial vehicle batteries over the next decade, according to Wood Mackenzie. The popularity of lithium iron phosphate batteries, initially seen as inferior, wasn’t expected.