Tesla held discussions over taking stake in Glencore

Tesla wants to take greater control of all manufacturing steps of its batteries. Keystone / Caroline Brehman

Tesla held talks with Glencore about taking a stake in the Swiss commodities group, in a sign of how global carmakers are seeking to build ties with the mining industry to secure materials needed for the rollout of electric vehicles.

Preliminary discussions about Elon Musk’s electric car and battery maker buying 10-20% of Glencore began last year, according to two people familiar with the matter.

They continued in March this year, when Glencore chief executive Gary Nagle visited Tesla’s factory in Fremont, California as part of a roadshow for the mining company’s annual results.

However, the discussions ended with no deal reached, according to the two people. Tesla had concerns over whether Glencore’s extensive coal mining business was compatible with the carmaker’s environmental goals, and was reluctant to take a minority equity stake.

The rise of electric vehicles has prompted concern among carmakers and battery makers about securing supplies of raw materials such as cobalt, lithium, and nickel that are needed to manufacture batteries.

Glencore is the world’s largest listed trading house and biggest producer of cobalt through its mines in the Democratic Republic of Congo, Australia and Canada. Two years ago Tesla secured a cobalt offtake agreement with the Swiss group to supply its factories in Shanghai and Berlin.

Musk has previously outlined Tesla’s intention to take greater control of all manufacturing steps of its batteries, including processing the raw materials and even buying lithium deposits still in the ground, if the supply chain fails to deliver.

In April, the billionaire took to Twitter, the social media site he bought this week, to voice his concerns about lithium costs: “Tesla might actually have to get into the mining & refining directly at scale, unless costs improve”. The price of lithium has risen eightfold since the start of 2021,

Tesla is also advancing with plans to build its own lithium hydroxide refinery on the Texas Gulf Coast.

Glencore produces cobalt, nickel, copper and other minerals, and is also one of the world’s largest recyclers of batteries. It does not mine lithium but recently started to trade the metal.

Analysts have been broadly sceptical over whether Musk has the appetite to invest in mining groups or trading houses, suggesting his comments have largely been intended to jolt raw material suppliers into increasing output.

As electric vehicle manufacturing increases, carmakers are scouring the globe to secure the raw materials they need, triggering a flurry of offtake agreements — multiyear deals to supply raw materials.

Glencore already has cobalt offtake agreements with battery makers SK Innovation and Samsung SDI, and carmakers BMW and GM.

As well as its cobalt offtake agreement with Glencore, Tesla has struck a long-term deal for nickel supply from Brazilian mining group Vale.

Ford has a lithium offtake agreement with Australia-based Liontown Resources that includes stumping up financing for the project upfront, and has taken a minority stake in a nickel ore processing plant in Indonesia.

Carmakers Stellantis, formed by the merger of Jeep owner Fiat Chrysler and Peugeot owner PSA last year, and General Motors have invested in early-stage mining groups.

However, big car groups have so far been reluctant to take direct stakes in mining majors. Many in the industry believe that more ambitious investments will eventually follow.

Tesla did not respond to a request for comment. Glencore declined to comment.

Additional reporting by Richard Waters.

Copyright The Financial Times Limited 2022