Eye on Lithium: Tesla opts for EV sales growth over profits

• Tesla prioritising growth over profits
• EV uptake continues to increase
• Piedmont unveils robust DFS for Tennessee lithium project

All your lithium news, Friday April 21.

Tesla’s decision to cut prices again reflects the electric vehicle manufacturer’s new focus on growth over profitability, a point which Elon Musk confirmed during his firm’s earnings call on Wednesday.

While the company had recently maintained that it would keep gross margins above 20%, Musk saying that “pushing for higher volumes and a larger fleet is the right choice here” is an acknowledgement that it now has to choose between growth and profitability.

He also noted that Tesla was subject to the consumers being more hesitant to buy amid rising interest rates and economic uncertainty.

In China, the company’s earlier price cuts resulted in a sales surge and sparked a price war with its EV competitors.

EV sales in China were up 22% in the first quarter of this year despite a 13% drop in overall passenger car sales, backing Alkem’s claims that EV demand continued to grow though at a lower rate than expected.

In Australia, sales of battery EVs in the March quarter were up 49.4% on the previous quarter with the 17,396 units moved exceeding the sales of petrol-electric hybrids (16,101 vehicles) for the first time.

This is all likely to be encouraging for lithium producers given that greater EV demand translates into greater need for lithium (and other battery minerals).

Here’s how ASX lithium stocks are tracking:

The general market malaise impacted on lithium stocks with 59 companies tracked by Stockhead in the red while just 34 companies remained in positive territory. Another 60 companies were unchanged.

WHO’S GOT NEWS OUT?

Piedmont Lithium (ASX:PLL)

The company has released a Definitive Feasibility Study outlining robust project economics of its Tennessee lithium project and the positive impact of the US Inflation Reduction Act.

Piedmont’s study has indicated that the project, which is designed to produce 30,000t of lithium hydroxide per annum, will deliver net present value and post-tax internal rate of return, both measures of profitability, of US$2.5bn and 32% respectively.

Highlighting the impact of the IRA, average annual steady EBITDA and after-tax cash flow were increased to US$376m and US$317m respectively.

The study assumes fixed prices of US$26,000 per tonne of lithium hydroxide and US$1,600/t of spodumene concentrate over the project’s 30-year life.

It also includes a Section 45X production tax credit of 10% under the IRA and assumes a credit of US$141.7m against project capital costs based on the expected receipt of a US Department of Energy grant.