While automakers are dealing with a semiconductor shortage, lithium is also a scarce commodity for electric automakers, but Tesla ensured its supply chain, striking a deal with the largest battery-grade lithium supplier.

China’s Ganfeng Lithium Co Ltd and its unit GFL International Co Ltd announced that it secured a three-year agreement with Tesla to be its lithium supplier starting in 2022.

“In order to help accelerate the transition to electric transportation, Tesla has become increasingly involved in the raw material supply chain for battery cells,” an Electrek article noted. “Despite only now starting the production of its own cells, the automaker has been securing the supply of lithium, nickel, cobalt, and other minerals for its battery cell suppliers.”

In the meantime, Tesla’s stock is soaring, now up almost 75% on the year. The electric automaker smashed earnings reports a couple of weeks ago, beating Wall Street expectations on both its top and bottom lines.

“The company’s overall stock market value already stood at $769bn at the end of September — up from just $75bn at the beginning of 2020 — before a 44 per cent rally last month lifted its market capitalisation to $1.22tn, making it one of the most valuable businesses in the world,” a Financial Times report says.

TSLA Chart

A Lithium ETF Worth Considering

One ETF to play, especially given that Tesla comprises about 6% of its holdings, is the Global X Lithium & Battery Tech ETF (LIT). The fund seeks to provide investment results that correspond generally to the price and yield performance of the Solactive Global Lithium Index, which is designed to measure broad-based equity market performance of global companies involved in the lithium industry.

LIT gives investors:

  • High growth potential: Lithium battery technology is essential to the rise of electric vehicles (EVs), renewable energy storage, and mobile devices.
  • Advancement of clean technologies: EVs produce zero direct emissions, meaning that broader adoption could result in reduced greenhouse gas emissions and improved urban air quality.
  • Unconstrained approach: LIT invests in companies throughout the lithium cycle, including mining, refinement, and battery production, cutting across traditional sector and geographic definitions.

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