Tesla's Battery Supply Chain: A Growing Concern

by: Andrew Hoffman

Publication Date: April 22, 2022
Length: 24 pages
Product ID#: 9-884-554

Core Disciplines: Operations Management/Supply Chain, Social Impact, Strategy & Management, Sustainability

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Teaching Note

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In October 2021, the fictional vice president of supply chain sustainability at Tesla is working on finding the best way to achieve Tesla’s goal of 100% recycling for the batteries in its electric vehicles (EVs) as they reach their end of life. A major challenge in this effort is that the current global capacity for lithium-ion recycling is in a nascent stage. Although the immediate need is relatively low since almost all batteries in present-day EVs have a lot of life left, by 2030 there is a forecasted need for about 1.2 million pounds of batteries to be recycled each year. Also by 2030, the first two million Tesla vehicles will be between 10 and 18 years old, meaning that hundreds of thousands of those are likely to have left the road and required decommissioning.

Further complications are the general need for lithium-ion batteries to be recycled due to their high content of toxic and heavy metals; the fact that some substances in the batteries are conflict minerals; and the requirements and expectations for Tesla regarding environmental, social, and governance (ESG) compliance and investing. The case introduces students to the history of EVs, the components of EV batteries and the battery supply chain, the process for EV battery recycling, and a general overview of ESG, as well as how it applies to Tesla.

Teaching Objectives

After reading and discussing the material, students should:

  • Develop a basic understanding of the nascent ESG landscape in 2021.
  • Recognize the complexity of the battery supply chain and the business case for product strategies, especially given the ESG landscape.
  • Analyze the internal and external pressures and the optionality driving sustainability decision making.
  • Determine the best path for a new business expansion strategy for electric battery recycling: organic, inorganic, partnership only, or a mix.