Well, it’s official.
Tesla (NASDAQ: TSLA) has finally inked a deal to build a new manufacturing plant in China.
And while there are plenty of naysayers who will question the company’s decision, there’s only one thing you need to know about why CEO Elon Musk made this happen…
There will be just as many electric vehicles sold in China this year as were sold across the entire globe in 2016.
This year, nearly 700,000 electric cars are expected to be sold in China. Last year it was 500,000. Next year, as reported in Forbes, that number will reach 2 million, and by 2020, it will be 3.4 million electric cars.
Make no mistake; while you have likely seen a lot more electric cars on the road these days than just three years ago, in terms of growth, China is crushing it.
Of course, some of this is the result of massive subsidies that would never fly here. But I don’t make the rules, I just profit from them. And Tesla’s doing the same thing.
China’s Electric Car Boom
Last year, about 15% of Tesla’s annual revenue came from China.
But with manufacturing set up in China, that number is going to skyrocket — mostly due to a reduction in manufacturing costs.
The bottom line is that China is where the biggest growth is going to unfold in the electric car space, and Tesla’s taking full advantage. Even with having to pony up a 25% import tariff, the company is still locked into the most lucrative electric car market on the planet.
Make no mistake; this was a brilliant move on the part of Elon Musk.
Of course, Tesla isn’t the only company benefiting from China’s electric car boom. In fact, the biggest winners will continue to be the lithium producers that, by the way, are in absolutely no danger from any form of competition.
Tesla’s in Bed with China
While I often read about the latest battery chemistries and technologies that are supposedly better than lithium-ion, there’s little chance of anything dethroning the lithium dynasty in the near term. And this is true even as cheaper alternatives do exist.
As reported by Greentech Media, worldwide, the number of lithium-ion megafactories has gone from just a couple three years ago to around 20 today. And about half of those are in China.
China will account for 62 percent of production, with almost 108 gigawatt-hours a year, followed by the U.S. with 22 percent (38 gigawatt-hours).
So why is this important?
Because while there are dozens of new battery developments that are being touted as the “next big things,” the lithium-ion battery industry is so far ahead of the competition in terms of scale and capitalization that the new stuff is hardly relevant at this point.
As an investor, you want to invest in the companies that are crushing it now — not 10 years from now. And if you’re looking to get a piece of the electric vehicle market, which is undoubtedly one of the most lucrative markets in the world, you must have exposure to the lithium space.
Certainly that’s what Elon Musk and Warren Buffett have been doing over the past few years. In fact, these two billionaires are now battling for control over some of the most lucrative lithium deposits in the world. But don’t take my word for it. You can read all about the fight over this lithium goldmine in this recently released white paper that highlights the lithium rush.
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Virgin Airlines billionaire Richard Branson and Chinese billionaire Jia Yueting are also fighting for some of this action. My colleague Keith Kohl actually wrote about this in a recent article where he highlights some of the latest lithium supply deals that are making early lithium investors insanely rich.
Just take a look at some of these things:
And, quite frankly, this is peanuts compared to what’s coming down the pike. Especially now that Tesla is in bed with China.
So if you’ve been sitting on the sidelines of the booming electric vehicle market, I strongly urge you to get some exposure now. Because this rush on lithium isn’t going to last forever.
To a new way of life and a new generation of wealth…
Jeff Siegel
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Jeff is the founder and managing editor of Green Chip Stocks. For more on Jeff, go to his editor’s page.
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