Elon Musk talks up lithium during Tesla earnings call

Published 22-APR-2022 12:26 P.M.

2 min read

Macro: Lithium

Tesla’s Q1 earnings conference call saw Elon Musk again talk up the lithium supply shortage.

His view on the lithium business was clear: “I’d encourage entrepreneurs out there looking for opportunities to get into the lithium business. The (profit) margins right now are practically software margins”.

“Do you like minting money? Well the lithium business is for you”.

The supply shortage Elon Musk is referencing is largely a result of battery manufacturing facilities coming online much quicker than the world's ability to discover and extract new lithium supplies.

Tesla isn't the only OEM (original equipment manufacturer) that is making investments in battery manufacturing facilities either. Other major OEMs, including VW and Daimler, are making large capital investments with an aim of electrifying their car fleets.

Just yesterday, Honda was the latest OEM to join this list. You can see our coverage of that in this previous Quick Take.

Almost on a daily basis the markets are being reminded of the global lithium supply shortage. Fortunately for our investments in the lithium sector, it isn't easy to make new lithium discoveries, let alone get them developed.

Building out new downstream facilities can be done in one to two years, whereas getting a new resource into production can take as long as seven years. As a result, we can’t see the shortage being addressed in the near term.

We hold the following lithium companies across our portfolios, which gives us exposure to this market. Click on the company names below to read our 2022 Investment Memos where we detail what we want to see the company achieve this year.

Vulcan Energy Resources (ASX:VUL) - Next Investors portfolio