Tesla's top China rival is exploring a faster method for lithium mining in Latin America — and offering free patents to build the industry

• Tesla rival BYD is exploring a new method of lithium mining in Chile, Bloomberg reported Tuesday.
• The Chinese firm aims to use a more direct way to extract lithium from Chilean salt flats.

Tesla's biggest Chinese rival BYD is looking to secure more lithium, a key battery material, by using a faster extraction method in northern Chile, Bloomberg reports.

BYD Executive Vice President Stella Li said in an interview Tuesday the company is holding talks with officials in Chile, a nation with huge lithium reserves, as well as companies in the lithium battery industry like SQM to explore new extraction technologies that would tap directly into Chilean salt flats, rather than the current technique of pumping brine and housing it in evaporation pods.

The goal would be for the company to establish in Chile the same direct lithium extraction, or DLE, method used in China, Li said. At the same time, BYD would be able to uplift the local commodity sector.

"BYD is ready to bring advanced DLE technology to Chile, and also we will develop R&D patents locally and offer free patents to the Chilean government to help Chile build up this industry," Li told Bloomberg.

Meanwhile, data from Benchmark Mineral Intelligence suggests the electric vehicle boom is going to squeeze lithium reserves in the coming years. It's possible, per the report, that more than $514 billion of funding will be necessary to meet the demand by 2030.

Lithium, while coveted in the EV business, leaves negative repercussions in locations where it's mined. There's a lot of land, water, and chemicals involved in extracting lithium, and it leaves waste in its wake.

In any case, BYD is coming off a record quarter, selling 700,244 cars, about half of which were all-electric.

In the same three month stretch, Elon Musk's Tesla delivered 466,140 vehicles, beating expectations and pushing its share price higher.

Still, Tesla's record-setting quarter and subsequent cheers from Wall Street masked a key stat: The company made more cars than it delivered for the fifth straight quarter.

That means Musk has his work cut out for him as far as finding new ways to boost demand, or else his company's inventory could keep ballooning and margins may shrink.

It's worth noting, too, that competition across the auto industry continues to heat up, with the likes of Tesla and BYD pitted against the long-standing demand for traditional gas-powered cars.

The two company's record delivery figures suggest that plenty of consumers do indeed want to go electric, but for Tesla in particular to resolve its production and delivery disparity, analysts say more price cuts could loom.