May 20, 2016
Petersen critiques Tesla's cobalt, lithium and graphite disclosure for EV batteries
Publisher: Investor Intel
Author: John Petersen
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May 20, 2016Petersen critiques Tesla's cobalt, lithium and graphite disclosure for EV batteries
It's been a fascinating week as one of my readers forwarded copies of a May 12 Commodities Comment from Macquarie Wealth Management that focused on China's recent efforts to shore up its cobalt supply chains and a May 16 report from Morgan Stanley that focused on expected growth in global demand for lithium, graphite, cobalt, and copper from the electric vehicle (EV) and lithium-ion battery sectors.
After studying both reports in some detail, I'm amazed at the human mind's capacity to embrace the alternative and inconsistent assumptions that, on the one hand, global demand for EVs and lithium-ion batteries can soar without, on the other, giving rise to the supply chain challenges I refer to as the "Cobalt Cliff."
Both reports have the look, feel and smell of hurried and half-hearted attempts to pad the due diligence files for Tesla Motors, which is conducting a $2 billion public offering but has not, in my opinion, fully and fairly disclosed the sources and availability of raw materials and related supply chain risks as required by SEC regulations. Instead, all we have is a generic check-box disclosure that:
"We use various raw materials in our business including aluminum, steel, cobalt, nickel and copper. The prices for these raw materials fluctuate depending on market conditions and global demand for these materials. We believe that we have adequate supplies or sources of availability of the raw materials necessary to meet our manufacturing and supply requirements."
I don't see how any company that has evaluated cobalt supply and demand dynamics and plans to become the biggest cobalt user on the planet could possibly conclude they have "adequate supplies or sources of availability" in the absence of iron clad long-term off-take agreements. I also chuckle at the absence of lithium and graphite from the list.
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