Tesla’s Decision to Remove Rare Earths from Its EVs Causes Chinese Stocks to Tumble
Global electric vehicle giant Tesla said on the 2023 Investor Day that it is creating a permanent magnet electric vehicle motor with zero rare earth elements, citing the need to lower costs and environmental risks that accompany mineral mining. Although the stock shares of many listed companies in China in the rare earth industry dropped heavily on the news, they indicated that the demand for rare earth will not fluctuate too much, and remain optimistic about the future development of the industry.
Tesla mentioned that between 2017 and 2022, due to the improved efficiency of its transmission systems, it successfully reduced the rare earth usage of the new drive units by 25%. In motors currently used by Tesla, only three rare earth elements are used, two of them weighing in at 10g each while the third requires 500g. Tesla’s next-gen drive unit, however, is slated to use zero grams of rare earths.
The three rare earth elements displayed by Tesla are reportedly neodymium, dysprosium and terbium. Despite the development, other parts may continue to use rare earths.
An industry insider explained that Tesla’s move may be caused by the shortage of rare earth supply in the United States, which mainly depends on imports. According to data collected by the General Administration of Customs in China, the export volume of rare earth permanent magnets in China has continued to grow since 2013. In 2022, the number reached 53,288 tons, an increase of 8.6% year-on-year and hitting a record high.
The motor is known as the “heart” of new energy vehicles, which can be divided into a permanent magnet synchronous motor and AC asynchronous motor, both of which have their own advantages and disadvantages. Specifically, the first one is more energy-saving and lightweight, but costlier. Although the second one costs less, its power and torque are lower and its size is larger.
It should be pointed out that Tesla first adopted an AC asynchronous motor without rare earths but started to adopt permanent magnet synchronous motors after launching its Model 3, before implementing this motor in other vehicle models.
Beijing Zhong Ke San Huan Hi-Tech Co., Ltd., a leader in the rare earth industry, publicly stated that, at present, the permanent magnet motor is still the optimal solution for new energy vehicles. The company believed that if only a single EV manufacturer uses permanent magnet motors, this would not have a fundamental impact on the whole industry in the short term. The large-scale application of new materials and new products still has a long way to go.
Tesla’s pullback on its use of rare earths is just a small bit of news, and it did not explain its alternative products or solutions. Meanwhile, there are so far no other major technological breakthroughs in the industry that could replace rare earths, according to one representative from Rising Nonferrous Metal Share Co.
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In addition, JL MAG Rare-Earth said that Nd-Fe-B magnet technology has been around for nearly 40 years since the 1980s, and is in the stage of large-scale application.
The rapid development of new energy vehicles is driving the high growth of listed companies related to permanent magnet motors. For example, Beijing Zhong Ke San Huan Hi-Tech Co., Ltd. is expected to achieve a net profit of 650 million yuan ($94 million) to 950 million yuan in 2022, a year-on-year increase of 62.96% to 138.17%. JL MAG Rare-Earth is expected to achieve a net profit of 700 million yuan to 830 million yuan in 2022, up 55%-85% year-on-year. Both of them are the main suppliers of Tesla’s permanent magnet motors.