Musk’s target of 20-million EVs by 2030 could cost Tesla $400bn

Detroit — Tesla CEO Elon Musk has set his young company on an aggressive expansion path like no other auto executive has dreamed — but one riddled with potholes and road blocks that could stall or sidetrack the journey.

Musk’s audacious goal of selling 20-million electric vehicles (EVs) by 2030 is at the centre of the company’s growth promise for shareholders and its pledge to drive the adoption of sustainable energy. If achieved, it would make Tesla twice the size of any carmaker in history, accounting for roughly 20% of the global vehicle market.

But such exponential growth — a 13-fold increase over the estimated 1.5-million vehicles it hopes to sell this year — will come at an unprecedented cost of hundreds of billions of dollars, according to a Reuters analysis of Tesla’s financial disclosures and forecasts for global electric vehicle demand, EV battery and battery mineral production.

“I’d equate this with the Manhattan Project in World War 2,” said manufacturing expert Michael Tracy of The Agile Group, referring to the sweeping effort by the US to build an atomic bomb.

Musk’s vision poses staggering challenges to the 19-year-old Texas-based carmaker, not the least of which is securing enough batteries and critical raw materials such as lithium and nickel to supply 20-million vehicles.

Tesla has been a disrupter, but this next phase of growth, if achieved, would go beyond disruption to fundamentally remake the global vehicle industry, as well as the mining and trade of battery materials.

Along the way, Tesla would need to build seven or eight more “gigafactories” — an average of one every 12 months or so — take share from every competitor and emerge as a company the size of Volkswagen and Toyota combined. It would also need about 30 times as much battery capacity to supply all of its vehicle factories.

The price tag will be steep: Tesla could spend an estimated $400bn or more over the next eight years to build new vehicle assembly and battery plants around the globe, and another $200bn or more to build or buy the batteries, including the cost of the raw materials.

Canada, Indonesia, India and other governments are already lobbying to win Tesla’s next investment in EV production, an announcement Musk has said could come by the end of the year.

Producing 20-million vehicles a year would require Tesla to expand both its own battery-making capacity, and the capacity of its battery partners and the raw materials producers that supply them.

“Long-term, we’re expecting to make on the order of 3,000GWh or 3TWh per year,” Musk told investors in July. “I think we’ve got a good chance of achieving this actually before 2030, but I’m highly confident that we could do it by 2030.”

Tesla’s current battery production capacity is 100GWh.

Benchmark Mineral Intelligence, which tracks the global EV battery industry, expects that Tesla will require 2-million tonnes of lithium, 1.3-million tonnes of nickel, 200,000 tonnes of cobalt and 3.5-million tonnes of graphite to support production in 2030 of 3TWh of battery production.

That is four times as much lithium and nickel, twice as much cobalt and seven times as much graphite as the entire EV industry expects to consume in 2022.

Benchmark describes the 2030 targets as “highly ambitious”.

Tesla did not respond to a detailed request for comment.

The carmaker, which rarely discloses its supplier relationships, began signing offtake agreements with miners and refiners more than a decade ago, according to former Tesla executives interviewed by Reuters, and currently has deals with more than 20 materials suppliers around the globe.

The raw material capacity needed to support Tesla’s planned production in 2030 does not exist today, experts say.

Musk’s sales target also depends on factors beyond Tesla’s control.

Rival carmakers are fielding more EVs to compete with Tesla’s high-volume Model 3 sedans and Model Y SUVs.

In China, home-grown start-ups such as Xpeng, Nio and Li Auto trail Tesla in sales volume, but are growing rapidly.

China’s BYD, which sells inexpensive electric and hybrid vehicles, is challenging Tesla globally, while Ford and Rivian have beaten Tesla to market with electric trucks, a big emerging segment in North America.

Mike Tracy is sceptical of Musk’s ability to develop a global manufacturing juggernaut over the next eight years with nearly double the production capacity of Toyota, currently the world’s largest carmaker by volume.

“That would be an extraordinary achievement, considering its taken Toyota decades to build that capability,” he said.

Reuters