Tesla Stock: Why is Elon Musk Optimistic about Lithium Investments?

Elon Musk is Optimistic on Lithium InvestmentsElon Musk’s Master Plan Could Be a Big Boost to Lithium Investments

Lithium is more than a metal or an element in the periodic table. It is literally one of the keys to the future. To suggest that investors should be optimistic about lithium stocks is an understatement. Lithium investments will rise, especially as Elon Musk has made the topic of lithium-ion batteries so current (no pun intended). Clearly, Elon Musk is bullish on lithium: his own Tesla Motors Inc (NASDAQ:TSLA) virtually revolves around lithium. To put it bluntly: Tesla stock would collapse without lithium.

If that isn’t clear enough, note that lithium is to an electric Tesla “Model S” what gasoline is to a Dodge “Charger” Hemi. The course of lithium in the markets compared to crude oil, for that matter, confirms this. Crude oil is struggling to remain above $40.00 a barrel, as the world has already started to adjust to the eventual demise of the internal combustion engine. The Tesla master plan is to gain a head start over everyone else.

Tesla does not only make electric cars, but the lithium battery itself—as well as efficient home batteries, known as the “Powerwall”. Therefore, it is easy to see that the company needs investors pushing lithium stocks so that mining of this mineral increases. And from where Elon Musk is standing, lithium mining will increase in order to meet demand.

Lithium Demand Has Already Had a Market Effect

Lithium prices have tripled from 2015 to 2016. But lithium is a rather scarce resource—not because it does not occur freely (and so far, the main sources are limited to Argentina and Chile.) —but because until just a few years ago, nobody got excited about lithium. Now the lithium battery and lithium battery stocks are generating a lot of buzz.

Yet Tesla’s huge and specially dedicated battery production facility, the “Gigafactory,” is in Nevada. That location owes much to the western U.S. state’s vast spaces and cheap real estate. Nevada is home to a significant lithium resource and one of the major lithium stocks to watch. Albemarle Corporation’s (NYSE:ALB) “Rockwood” division accounts for over 30% of global lithium production, mostly in Chile and Brazil. But now, it has its sights on Nevada to take advantage of a double whammy: the Gigafactory and high-grade lithium.

Benchmark Mineral Intelligence, a consultancy specializing in rare metals and industrial innovation, said that the lithium price in the past three years has gone from $5,000 to $8,000 per metric tonne. (Source: “Tesla Will Need A Lot Of Graphite & Lithium (But China Will Need More),” Benchmark Mineral Intelligence, April 7, 2016.) The value of this asset, given the rising demand for lithium batteries (technically Li-ion batteries) has not even begun to express its full potential. It is a bonanza for lithium investments and lithium stocks.

Lithium is the Commodity Trade of the Decade

Indeed, not only should Elon Musk be optimistic about lithium, he should be worried. Lithium could easily be the commodity of the decade. When we think of electric cars these days, Tesla might be the first company to come to mind. But Tesla is but the tip of the melting iceberg. Electric cars are rather big in Asia. BYD in China needs more lithium than Elon Musk does; it’s making at least 100,000 electric cars a year already and plans variations from trucks to buses. In India, there is an electric-only taxi company called, what else: Lithium Cab.

Goldman Sachs calls lithium the “the new oil”. The Economist says it’s the “hottest” of the moment. Forget about global demand for a minute. Current lithium production of about 40,000 metric tonnes a year can hardly satisfy the demand for lithium in China alone. Consider that a Li-ion battery for a car has at least 60 kg of Li; multiply that amount by the growing demand of vehicles and a rather bullish picture should emerge. Now, back to the United States and Tesla, which has received over 300,000 orders of its forthcoming mass-market “Model 3”.

Even if Tesla can’t meet its production targets; even if Tesla fails, lithium is waiting for nobody. Mercedes Benz, GM, Ford and just about every major automobile manufacturer in the world is planning to gradually increase its offer of electric cars. The electric car is moving from exclusive to mainstream—everywhere.

The reason why lithium is so exciting, however, is that there is still a world of novelty surrounding electric vehicles. You can invest in the actual manufacturers of batteries—which include Tesla—or you can invest directly in the fuel that today powers just a minor fraction of one percent of all cars in the world. In 2040, however, according to Bloomberg, electric cars will account for 35% of new registrations. (Source: “Here’s How Electric Cars Will Cause the Next Oil Crisis,” Bloomberg, February 25, 2016.)

The Bottom Line on Lithium Investments and Tesla Stock

Lithium, which until not long ago was mostly used by the pharmaceutical industry to address depression, is coming. Its success is intimately tied to the success of the electric car, and the electric car owes much to Elon Musk, the CEO of Tesla Motors. If the bullish prospects are not clear enough, note that all of those people buying electric cars are putting their money, essentially, into a lithium battery.

Musk’s Gigafactory will run at full capacity in 2020 but, as early as next year, will begin to provide the batteries for the highly anticipated Model 3. So, click here to learn about some lithium investment strategies and top lithium stocks before everyone else gets in on the action. Check out our latest report, “17 Million Drivers No Longer Pay for Gas?