According to Reuters, the Tesla Model 3 will use a permanent magnet motor, one of which is made of rare-earth metals, neodymium, which will further increase the supply pressure. The supply of neodymium has been tight for years, as China, the country's first producer, issued export restrictions.
Governments around the world are committed to cutting the harmful emissions from fossil fuel vehicles, pushing up demand for electric cars and metals such as lithium and cobalt. These metals are the key material for the battery.
Now, neodymium is the focus. Several carmakers have adopted a permanent-magnet motor made of neodymium, because they are lighter, stronger and more efficient than induction motors fitted with copper coils.
Tesla's move to adopt a neodymium permanent magnet motor is a harbinger of future trends in the automotive industry, and the demand for neodymium will become more robust.
Research firm IMARC estimates that the ndfeb magnets used by these motors have a market of more than $11.3 billion. The compound annual growth in demand for such magnets was 8.5 per cent between 2010 and 2017.
Metals consultancy Roskill senior analyst David Merriman said, 'some of the electric car motor, permanent magnet technology has been adopted one of the most famous is the Tesla Model 3 version for long life. All other Tesla models use induction motors.'
In 2017, demand for neodymium is very serious, with a global demand of 31,700 tonnes and a supply of 3,300 tonnes. Demand for neodymium is expected to rise to 34,200 tonnes this year, rising to 38,800 tonnes next year, further exacerbating the supply and demand gap.
'Tesla's decision to choose permanent magnet motors will completely change the dynamics of the market," said fund managers specialising in metals investments.
Now the price of neodymium is about $70 per gram, far lower than in 2010 for $500 per gram (China stopped exports of rare earths to Japan in 2010, the price of neodymium then jump), but still price is 40% higher than in early 2017.
In 2010, China imposed strict export quotas on a range of rare earth metals in an effort to curb pollution and protect natural resources. But in 2015, China resumed exports of neodymium.