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Comment by Hermitian909 | Hacker News Reader

> As long as Tesla doesn't own the Li suppliers or mining rights, it doesn't matter how much Tesla got in the past

My understanding is that Tesla is leveraging long-term contractual lock-ins in various shapes. One particular one I heard was that in exchange for fronting some of the up-front cost for the mine Tesla would retain the right to buy X% of the mine's output at a maximum markup of Y% over cost to produce.

This kind of contractual lock-in can achieve the desired goal without using either of the mechanisms you listed.

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These types of contracts are not new or innovative.

They're usually used by mining companies to hedge future market variance, and are not exclusive to Tesla either. On top of other companies having these contracts in place as well, mining companies will pay to break these contracts if a high enough bidder comes along or flat out pays them to break it.

With demand pricing spiking for batteries, these lock ins are not very strong.

> These types of contracts are not new or innovative.

Agreed.

> On top of other companies having these contracts in place as well

Yes, but scale is important. My analysis at the time was that Tesla was locking in significantly more material behind contracts than Toyota or other companies.

> mining companies will pay to break these contracts if a high enough bidder comes along or flat out pays them to break it.

This assumes the contract is written in such a way that Tesla does not have to consent to the contract being broken. My understanding was that Tesla was trying to get into as many contracts as they could without such clauses.

It is illegal to abuse your access to certain things in order to squeeze competitors, if Tesla actually has contracts that would secure enough Lithium to have negative effects on competitors (no idea if that really is the case), abusing this position would expose Tesla to all kinds of legal troubke caused by this anti-competitive behaviour. Lithium supplier might then be legally obliged to supply Tesla's competitors at the same conditions as Tesla if not enough Lithium is availavle to fulfill orders. Working with Li suppliers to starve competitors of Li deliveries would even be worse. Given Musk's, and Tesla's, cavalier attitufe when it comes to rules and regulatuons, I wouldn't be surprised if they tried so.

Source: More compliance trainings I can count and enough real life experience with monopolistic raw material suppliers to know that abusing market position to hirt competitors is a really bad idea.

Any contract between major market suppliers and consumers that do not have a break clause is open to being interpreted by a civil court judge as okay to break without much, if any, penalty.

I don't think that they were have to be new or innovative for Tesla to have a strategic Advantage relative to others with them.

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