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Tesla's new Texas lithium refinery to support 1M electric vehicles by 2025

Tesla officially broke ground Monday on a Texas lithium refinery, making it the only U.S. automaker to refine its own lithium.

CEO Elon Musk said the refinery will produce enough battery-grade lithium for 1 million electric vehicles by 2025, which would make Tesla the largest processor of lithium in North America. Tesla will continue to rely on existing suppliers like Albemarle and Livent as it aims to reach its 2023 sales goal of around 1.8 million cars globally.

Lithium is the key critical material in lithium-ion batteries that power the electric vehicle revolution. Today, the U.S. produces just 1% of the world's lithium, with Australia, Chile and China leading the way. The Biden administration's EV tax credit aims to spur more domestic battery material sourcing and production and reduce the U.S.'s reliance on China, which hosts 60% of the world's lithium refining capacity and nearly 80% of the world's lithium-ion battery production capacity.

"As we look ahead a few years, a fundamental choke point in the advancement of electric vehicles is the availability of battery-grade lithium," said Musk, during the ground-breaking ceremony outside of Corpus Christi.

The CEO drove up to the event in a Cybertruck complete with a roof rack accessory that caught the attention of industry watchers. Government officials such as Texas Governor Greg Abbott, Nueces County Judge Connie Scott and Deputy Assistant Secretary at the U.S. Dept. of Energy Kathleen Hogan attended the event.

Musk said the company aims to finish construction on the refinery next year, with full-scale production slated for 2025. The executive described the timeline as "extremely fast by normal standards." That may be true, but it's slower than Tesla had originally projected. During Tesla's Investor Day in March, Drew Baglino, senior vice president of powertrain and energy engineering, said the company aimed to have the refinery operational by the end of this year and start production early next year.

Baglino also said at the time that the refinery would have a 50 gigawatt-hour per year capacity, something Musk did not confirm during Monday's event.

During Investor Day, Musk also encouraged other startups to get involved in refining lithium, which he likened to "minting money."

“We’re doing it because we have to, not because we want to,” Musk said previously.

Tesla will invest $375 million to build the facility, according to filings with the Texas Comptroller. The refinery is Tesla's latest expansion into Texas, which began when the company moved its headquarters to the state from California in 2021. The automaker invested nearly $6 billion into its Austin gigafactory last year. In January, Tesla said it planned to invest another $770 million to expand the factory to include cathode and drive unit manufacturing and a battery cell testing site.