Tesla Investor Day announced the details of Master Plan 3, which plans to invest 10 trillion US dollars to create a sustainable energy future, including mining and refining raw materials to develop energy storage and car batteries. Musk said that with the improvement of battery technology, all vehicles except rockets will be fully electric and autonomous. Most notably, Tesla pointed out that in order to prevent health and environmental risks, the permanent magnet motors used in the next-generation drive system (next drive unit) will be completely free of rare earths. The market believes that this move may help to get rid of the unstable supply of rare earths in the United States.
Affected by the relevant news, Tesla’s stock price jumped nearly 6% to US$191.4 following hours because Tesla did not release a new car model. In addition, many Chinese rare earth-related stocks listed on the A-share market fell in response. Among them, Jinli Permanent Magnet (300748), a high-performance rare earth permanent magnet material manufacturer, plunged 7.4% to close at 29.82 yuan; Huahong Technology (002645), a rare earth recycler, fell 7.6%, to close at 16.22 yuan. As for China Rare Earth (769), which is listed in Hong Kong, it fell nearly 2% to close at HK$0.5.
The United States imports almost all of its rare earths
In fact, rare earths have been a bone of contention in the electric vehicle supply chain because they are used in everything from motors, speakers, hard drives and powerful magnets to electric motors, but almost all of the rare earths used in the United States rely on imports, making it difficult to secure supplies. And quite affect the future development of Tesla.
It is worth noting that the word Musk used this time is “returning” to motors that do not contain rare earths. In fact, Tesal initially used an AC induction motor that did not require rare earths in its vehicles. It was not until the Model 3 was launched that it quietly launched a permanent magnet DC motor containing rare earths, and this motor was also used in other models.
Musk said it has succeeded in reducing rare earth use in new Model 3 drive modules by 25% between 2017 and 2022 due to improved drivetrain efficiency. Although Tesla did not specify which element it plans to use to replace rare earths, it announced the decision in the Master Plan, which means that it may be possible to find a better solution in the near future.
At present, China is the world’s largest rare earth mining and refining country, but as the outbreak of the epidemic disrupts the supply chain, China and some Western countries have entered into a confrontation, and the issue of over-reliance on China’s rare earths has alarmed Western countries. As early as 2019 and 2020, there were even rumors that the Beijing authorities might restrict the export of rare earths, and U.S. President Joe Biden also decided to give priority to the development of rare earth supply sources outside of China in order to maintain the domestic supply of the United States.
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