Tesla is the moonshot company with outsize expectations. In news reports, they are often mentioned with the same kind of head-shaking wonder and disbelief usually reserved for sports commentators; traditionally skeptical bloggers have written lengthy, fawning posts about their CEO, Elon Musk;  respected fiction authors have included thinly-veiled depictions of him quite literally saving the world.  No surprise, since he has been a champion for climate change as the most imminent and credible threat to human survival. When asked why he released Tesla’s patents to the public in 2014, he commented: “We’re all on the same ‘ship’ (being Earth)… if there are a bunch of holes in the ship, and we have a nice bucket design, it would be foolish not to share it.” 
Tesla’s recent innovations in the electric car space have obvious climate change implications. Before widespread adoption can take place, however, there are a number of areas that will require additional infrastructure build-out, including the proliferation and maintenance of commercial charging stations. At the heart of the whole operation – and a potential source of problems for Tesla – is the production of electric car batteries. Lithium-ion batteries are currently one of the most effective rechargeable battery classes available (in terms of performance-to-weight). In addition to being the battery of choice for electric cars, they are also widely used in a variety of consumer and industrial applications, including mobile phones, power tools, aircraft, telecommunications infrastructure, and even the Mars Curiosity rover. They have been available commercially since 1991  and right away displayed tremendous potential in volume of applications. Exponential growth was driven by the proliferation of smartphones and laptops in the late 90’s and 2000’s. And that growth shows no sign of stopping: TechSci Research estimates the global Lithium-ion demand will increase at a CAGR of over 17% from 2016-2021, driven in large part by demand for ‘portable and stationary energy storage.’ 
To ensure adequate production capacity, Tesla recently completed initial construction of its ‘Gigafactory,’ a 1.9M sq.ft. manufacturing plant for lithium-ion batteries, as well as initial build-out of a ~3.4M sq.ft. addition. At completion, Tesla expects the factory will – by itself – exceed the world’s current combined annual output of li-ion batteries with 150 GWh of potential annual capacity. Tesla has also taken steps to secure the supply of raw lithium, including partnering with Codelco to source Chilean lithium and attempting to purchase lithium startup Simbol for $325M. 
The most common form of lithium-ion batteries, known as Lithium Nickel Manganese Cobalt (Li-MNC), are preferred for their high energy density, negligible memory effect, and low self-discharge. Despite the name, the composition isn’t dominated by lithium at all; in a 1,000kg battery, just 65kg is made up of lithium. The remainder is a spectrum of materials that range from cheap, readily available aluminum to rare cobalt, which has a market price of $27K/tonne. In procuring these metals, Tesla faces several environmental and ethical challenges. Nickel and cobalt were identified in a 2013 EPA report as having the “highest potential for environmental impacts,” with consequences such as global warming, environmental pollution, and human health effects. The mining of lithium is also a complicated and disruptive process, involving the use of massive amounts of water (usually imported) and toxic chemicals for brining and leeching.
There are also some ethical and complicated geopolitical questions when it comes to cobalt, the most critical and rare component in the batteries. Fully 65% of global cobalt supply is mined in the Democratic Republic of the Congo, where it is reported approximately 40,000 children – some as young as seven years old – work as miners. Similarly, flake graphite, another essential component, is sourced primarily from China, where several mines have recently been shut down due to poor environmental and labor practices. 
Sourcing ethics questions dogging global manufacturers is nothing new. But given its market position, there may be an opportunity for Tesla to lead on more than just the climate change front. As one of the world’s soon-to-be largest consumers of numerous rare materials, they will wield significant market power to effect changes in the processes and outcomes of their sourcing and supply chain. In terms of priorities, I would recommend that Tesla:
- Review and design a set of sourcing principles along environmental, humanitarian, and quality rubrics that will guide supply chain and sourcing decisions
- Conduct a comprehensive audit and review of all current sourcing firms
- Partner with willing suppliers to adhere to new standards, and replace resistant or non-compliant suppliers
Tesla has a mission to save the world; but in its eagerness to bail a sinking ship, Tesla should remember not to trample those in the way.
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