Elon Musk is back in the hot seat, with the Tesla CEO forced into a tight spot when it comes to the future of the electric vehicle giant.
It’s been a rocky 2025 for Tesla, and while some have been calling for Musk to step away, he’s left politics behind (albeit temporarily) and vowed to return to focusing his efforts on his EV baby.
As Tesla continues to drive down this bumpy road, Elon Musk is at a crossroads when it comes to how the company sources key components for its production line.
President Donald Trump has recently gone to war with Mr. Musk over removals of the EV mandate and threatening key tech territories like China with massive trade tariffs.
What is China’s lithium discovery?
With around half of the 1.8 million Teslas made every year coming from the China Gigafactory, the country has some serious leverage over the future of the company.
Musk was already said to be a major winner following a potential $1.5 trillion lithium discovery in a Nevada supervolcano, but now, China has apparently unearthed its own motherlode.
Discovered recently in the Hunan Province, officials from the provincial department of natural resources confirmed that Linwu County’s Jijiaoshan mining area has 540 million tons of lithium ore, which is thought to contain 1.31 million tons of lithium oxide.
Importantly, the discovery of lithium ore is composed of an altered, granite-type structure. Typically mined using hard-rock methods, it has faster crushing and processing, meaning lower up-front costs and more flexible product outputs.
China’s share of global lithium reserves climbed to 16.5% in 2025, making it only second to Chile. Aside from raw lithium, China is said to be in control of over 70% of the world’s lithium refining capacity.
Where does Tesla source its lithium?
Tesla’s Shanghai Gigafactory could become even more crucial (Bloomberg / Contributor / Getty)
Currently, Tesla relies heavily on its Nevada Gigafactory, which was designed jointly with Panasonic. It sees Panasonic provide critical battery cells, before Tesla integrates them into battery packs.
Still, while Musk’s 2020 Battery Day promised new ways to extract lithium from clay, it’s yet to be proved at a commercial level. In fact, Goldman Sachs suggests that EV battery costs are at record lows and are expected to tumble 40% between 2023 and 2025.
Musk previously invited Argentine President Javier Milei to his Austin Tesla factory to discuss investment opportunities in Argentina’s lithium sector, but now, China is even more of a big dog.
China’s increased market dominance means there’s potential in a further reduction in the costs of making lithium batteries, which in turn could bring prices down across the Tesla supply chain. Then again, Tesla also sources lithium across the USA, which is sure to make President Trump happy, as he wants to make America great again in terms of manufacturing.
China is poised to become even bigger in the EV market, and even though Tesla could happily ride on that train, Trump’s tariffs will undoubtedly see costs rise in some areas, as the lithium discovery could bring them down in others.
