EVs Run On Batteries, And Tesla Knows It

Knowing that batteries are what power its vehicles, Tesla TSLA -0.92% took another step on Tuesday to guarantee that it would have enough to satisfy demand.

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According to a Google translation of a Korean-language disclosure by L&F, Tesla (ticker: TSLA) and a Korean manufacturer of materials for battery cathodes, L&F (066970. Korea), struck a $2.9 billion transaction for battery materials. The company's market worth increased by around $500 million to about $6 billion as a result of the news, sending L&F stock up nearly 9% on Tuesday.

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Lithium, cobalt, nickel, iron, and other metal combinations make up the cathodes, which are the positively charged side of a battery. Graphite is frequently used for the negatively charged anode.

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Manufacturers of batteries include Contemporary Amperex Technologies Co. in China. Ltd. (300750, China), more commonly known as CATL, often purchases the materials for battery cathodes. But in order to have more control over their EV supply chains, all vehicle manufacturers are developing battery plants.

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For many years, Tesla has been producing batteries. In Nevada, the business began construction on its battery "gigafactory" in 2014. Now, the plant produces about 37 gigawatt hours of batteries annually, which is sufficient to power about 500,000 EVs.

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Tesla made plans to increase Nevada's battery capacity by 100 gigawatt hours in January. According to Tesla, the increased battery capacity and manufacturing facilities for the Tesla semitruck will lead to a $3.6 billion increase in state investment. According to Trade Algo, the state may grant tax rebates worth more than $300 million as a result.

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A request for comment regarding the breaks and the cathode-material deal received no response from Tesla.

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Tesla has entered into offtake arrangements with lithium miners in addition to cathode materials, and it has started the process of obtaining licenses for its own lithium refining capacity in Texas. The business is not the only one attempting to get more influence over the EV supply chain. For example, General Motors (GM) has agreements for cathode and lithium materials to supply the battery factories it is developing.

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At Tesla's investor day, which will take place following the conclusion of trading on Wednesday, investors can anticipate learning more about batteries among other topics. In a note released on Monday, Wedbush analyst Dan Ives stated, "We think the business will provide significant updates on its global expansion [and] capacity plans, overall demand, notably in the crucial China market, and supply bottlenecks.

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The product roadmap will also see "a deluge of upgrades, which we believe will include Cybertruck updates and scheduling, Semi Truck delivery updates, 4680 battery technology and scale update, and the roadmap to what will ultimately be a vehicle in the $25,000 to $30,000 region," according to Ives.

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Larger batteries that are more cost-effective than smaller ones are referred to as 4680 batteries.

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In premarket trade, Tesla stock was up 0.2%, while S&P 500 futures were up 0.1% and Nasdaq Composite futures were up 0.2%.