Tesla tumbles but stands to reshape global metals market and aluminium demand

Electric car maker Tesla's shares have tumbled after the company lost two executives and nearly doubled its first-quarter loss, but some analysts are turning their attention to the company’s potential effect on the global metals market, especially lithium, aluminium, and copper.

The company yesterday reported a quarterly loss of $US283 million due to lower than expected deliveries, but said it would increase annual production to half a million cars two years earlier than it had planned.

Despite the company’s woes, growing demand for electric cars could reshape the consumption of metals in the auto industry, some market participants say. The individual metals needed to manufacture an electric car are numerous, but potential beneficiaries range from obscure materials such as lithium to beleaguered commodities like aluminium and copper.

Tesla though a niche car maker, is moving to attract mainstream consumers, as it prepares to release its most affordable car yet. The Model 3 has received almost 400,000 reservations since the company began taking deposits on March 31. On Wednesday, the company upped its forecast for delivering 500,000 vehicles globally in a year to 2018, earlier than its previous goal of 2020.

“The narrative is changing,” said Bart Melek, head of commodity strategy at TD Securities in Toronto. “We are headed in the direction where these vehicles are becoming affordable for the mass market. The technology is at a point in time where we could envision this as an ever-increasing factor.”

One metal market is already surging on growing demand from electric vehicles- Lithium used in ion batteries. The metal has gathered attention from mining companiesa and investors in light of Tesla’s plans to manufacture its own batteries.

Aluminum demand is also set to gain from a development in the auto industry known as lightweighting, substituting aluminum for steel to create lighter cars. A Goldman Sachs report from April points toTesla as one carmaker that has previously used an all-aluminum body frame in its Model S car, although the makeup for the Model 3 is still unclear.

However, analysts point out that even with its latest car orders, Tesla remains a very small portion of the auto industry. According to data released on Tuesday, US car sales hit 1.5 million in April, on an annualized pace for sales of 17.4 million vehicles.

“This will certainly be a positive, but the broader macro trends like housing [and] general manufacturing, for the next half-decade, are going to be much, much bigger drivers of demand for these metals,” Mr Melek said.