The Liontown Resources Limited (ASX: LTR) share price is up 0.5% in morning trade on Friday.
The ASX lithium stock closed yesterday trading for $1.84 and is currently trading for $1.85 per share.
The Liontown share price has leapt 22% since last Thursday's close, and handily outperformed the All Ordinaries Index (ASX: XAO) in 2022.
That outperformance has been driven by strong demand and near-record prices for the critical battery metal lithium.
The Liontown share price got a big boost from Tesla in February
Investors were particularly keen earlier this year after Liontown announced it had entered into a binding lithium supply agreement with global electric vehicle (EV) giant, Tesla Inc (NASDAQ: TSLA).
Tesla agreed to purchase lithium spodumene concentrate from Liontown's $473 million Kathleen Valley Lithium Project, in Western Australia.
The initial five-year agreement, expected to commence in 2024, will see Liontown supply Tesla with 100,000 dry metric tonnes (DMT) of lithium spodumene concentrate in the first year. Tesla agreed to buy 150,000 DMT in the following years.
Liontown shares surged more than 16% on 16 February, the day of the announcement.
Why might Tesla's results impact Liontown?
Despite some strong annual growth figures, investors were less than impressed with Tesla's quarterly results, reported yesterday.
The disappointment likely stemmed from the EV giant's quarterly revenue figures falling slightly short of consensus expectations. Whatever the cause, the Tesla share price closed down 6.7% yesterday, bringing its 2022 losses to a painful 48.2%.
While this doesn't look to be having any immediate impact on the Liontown share price today, the broader picture could cast a shadow over the medium-term outlook for lithium demand.
According to Eliot Hastie, markets analyst at Australian digital brokerage Stake, "Some analysts believe that softening demand is the primary concern, with sales in China – Tesla's biggest market – having slowed due to rising competition and a poor macroeconomic landscape."
Hastie continued:
Tesla still makes up just under a fifth of all global battery-only electric vehicles sales, so it's a significant sentiment driver for Australian lithium stocks. The brand's earnings could be seen as a negative sign for lithium demand in the short term by some, but the need for this commodity is still predicted to increase exponentially over the long term.
I think Hastie nails it there with the long-term outlook for lithium demand and prices.
A slowdown in China could impact Tesla and the Liontown share price in the shorter term. But analysts are broadly in agreement that the 10-year global demand outlook for lithium remains very strong as EV markets are forecast to continue growing rapidly.
