The reason Tesla Motors (NYSE:TSLA) is building a giga factory is to bring down the cost of batteries used in its cars. Currently, Tesla says that its battery costs are around $200-$300 per kilowatt hour. The Silicon Valley based auto maker says that it can bring down the costs by 30% through scale alone. However, the entire process of bringing down battery costs presupposes the availability of the grade of lithium required for the making of those batteries. Tesla might run into snags on that front in two possible ways: 1) There might not be enough lithium to support the volume of its giga factory and 2) there might not be enough supply of lithium hydroxide at a cost low enough to support the economics of the giga factory.

Source: Tesla’s Lithium Supply Constraints Might Hamper Its Growth — Trefis