Tesla Held Talks With Mining Giant Glencore Over Equity Stake

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by Tyler Durden
Monday, Oct 31, 2022 - 01:20 PM

Tesla and mining giant Glencore held talks earlier this year about an equity stake in the Swiss commodities group, according to Financial Times, speaking with two people familiar with the matter. The move would've allowed Tesla to have increased control over securing supplies of metals for battery production. 

Elon Musk's electric car company was pursuing a 10-20% equity stake, but the two companies could not strike a deal earlier this year. 

One reason the talks ended was Tesla's concern that Glencore's coal mining segment wasn't compatible with the carmaker's ESG goals. 

One month after Glencore chief executive Gary Nagle toured Tesla's factory in Fremont, California, Musk tweeted in April that Tesla may get into the lithium mining and refining business directly

"Price of lithium has gone to insane levels," the billionaire tweeted. "There is no shortage of the element itself, as lithium is almost everywhere on Earth, but pace of extraction/refinement is slow."

Tesla has already secured a cobalt offtake agreement with Glencore that provides the car company with thousands of tons of cobalt per year for factories in Shanghai and Berlin.

In a recent earnings call, Morgan Stanley's Adam Jonas asked Tesla executives about vertically integrating into mining. Here's what Musk said in response to Jonas:

"We'll do whatever we have to. Without limiting factors, we'll do. We do not personally constrain ourselves. We don't particularly integrate just for the hell of particularly integrating."

"Like if there was a great supplier who's better than us or we think actively is very good, or even where the economics of comparative advantage suggests that we should use that supplier, even if we could beat them, but we could use our resources to do something else that will be more productive, then we would in source in that case. But if we have to go mine, we will mine." 

EV manufacturers have yet to direct stakes in mining companies, but that could soon change as the Western world pursues banning petrol cars in the next decade. Investments in mining and refining will greatly need to expand to increase EV production.