Tesla firms up EV battery supply in Glencore cobalt, Panasonic pricing deals

Tesla is firming up battery supply for its growing range of electric cars, inking a new deal to source cobalt from Glencore and extending its manufacturing deal with battery partner Panasonic to 2030 with prices locked in until 2023.

Cobalt from the new deal with Anglo-Swiss mining giant Glencore will be used to manufacture batteries for vehicles built at its Shanghai Gigafactory in China, as well as at its upcoming Gigafactory outside Berlin, Germany, sources familiar with the matter told  the Financial Times.

News of the deal with Glencore comes as Tesla discussed its position on sourcing cobalt – 60% of which comes from the Democratic Republic of Congo (DRC) where child labour accounts for a fifth of its extraction – in its recent impact statement.

In that impact statement, Tesla said that it “recognises the higher risks of human rights issues with cobalt supply chains, particularly for child labour in the Democratic Republic of Congo,” and that it was making “significant effort to establish processes to remove these risks from our supply chain.”

“Where we can be assured that minerals, including cobalt, are coming from mines that meet our social and environmental standards, we will continue to support sourcing from the DRC and other regions,” stated Tesla.

Tesla has been working towards using less cobalt in its batteries, such as in China where it recently gained approval to use CATL’s lithium iron phosphate (LFP) batteries in its locally made Model 3.

However the new deal with Glencore – which will be a boon for the mining company after cobalt prices shed some two-thirds of its value since 2018 according to Trading Economics – will ensure Tesla can also achieve better control over the cobalt supply chain, the FT says.

While the cobalt sourced from Glencore will be used to supply battery makers in China, amendments to Tesla’s existing deal with Panasonic also secures battery supply from the Japanese electronics giant for the next decade with a pricing agreement locked in until 2023.

According to a Form 8-K filed on Tuesday (US time) by Tesla, the amended deal, referred to as “2020 GTC”, will expire in 2030 and is dependent on Panasonic achieving manufacturing milestones.

It also sets out terms for a pricing deal until 2023 for Panasonic’s 2170 cells made at the partnership’s Gigafactory Nevada, assuring a production volume from Panasonic and purchase volume commitment from Tesla.

The renegotiation of the partnership between Tesla and Panasonic – which was previously Tesla’s exclusive battery manufacturer – comes after Panasonic said it would terminate its four-year venture with Tesla making solar cells and modules at Tesla’s factory in Buffalo, New York at the end of May.

Tesla also sells batteries in the form of Powerpack and Powerwall energy storage units; its Horndale “big battery” gained considerable media attention after it was installed in 2018 when Tesla CEO and co-founder Musk responded to a request from Australian billionaire Mike Cannon-Brooks. It has since recouped the cost of its construction in a little more than two years.