Tesla is currently in talks with Sociedad Química y Minera de Chile (SQM), Chile’s largest Lithium producer, as a possible partner in the development of a processing plant in the South American country.

Chilean development agency Corfo executive vice-president Eduardo Bitran noted that the deal between Tesla and SQM would likely result in a new facility that would aid the Elon Musk-led electric car maker and energy firm in securing the supply of raw material used in lithium-ion batteries.

In a statement to the Financial Times, the Corfo executive vice president stated that Tesla’s interest in Chile would ultimately help the country become a key player in the emerging electro-mobility market. Lithium, after all, is a valuable component of electric car batteries, and it is incredibly abundant in the region. As electric vehicles become more mainstream, however, the prices for battery raw materials have also soared. Thus, in a lot of ways, Tesla’s initiatives at sealing a partnership with SQM will not only result in more battery supplies for its cars; it would help the company’s operating costs as well.

“With an increasing supply of lithium, Chile is key for any company that wants to become global in electro-mobility. Being close to Chile or having a strategic alliance in Chile becomes a strategic factor for a company like Tesla,” Bitran said, according to an FT report.

As the auto industry races to develop and build emissions-free vehicles, lithium-abundant countries such as Chile are set to emerge as valuable partners for the world’s biggest car companies. Like Tesla, Toyota has also expressed its interest in securing a partnership with a lithium provider from the region. Just recently, the Japanese automaker purchased a 15 percent stake in Orocobre, an Argentinian lithium producer, most likely as a strategic initiative to secure lithium resources for its upcoming electric vehicles.

Chile’s lithium industry has the potential to significantly improve the South American nation’s economy. Considering that Chile owns 54 percent of the world’s lithium reserves — around 14.3 million cubic tonnes, it is estimated that the lithium industry can attract as much as $10 billion in investment and up to 10,000 new jobs for its citizens, as noted in a report from the Global Finance Magazine.

Overall, Bitran is quite optimistic about the idea of Tesla investing in a lithium facility in Chile. While talks are still in early stages, the Corfo executive believes that the American company’s initiatives might end up starting a chain reaction that benefits not only the country’s lithium industry. In a further statement to the FT, Bitran asserted that Tesla could, in the future, even manufacture battery cathodes in the South American nation, since Chile has some of the world’s most affordable solar power.

Neither Tesla nor SQM has released a statement about the companies’ possible deal.

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