Tesla and Chinese battery manufacturer CATL are reportedly exploring the possibility of building a lithium iron phosphate (LFP) battery plant in the United States, according to sources familiar with the matter. Bloomberg was the first to report on this story. The location of the potential factory has not been finalized, nor has an agreement been reached between the two companies.
Sources familiar with the discussions state that Tesla executives met with U.S. politicians to assess the application of the U.S. Inflation Reduction Act. The law requires that electric vehicles (EVs) made with a certain amount of China-linked materials in their batteries do not qualify for tax credits. The aim of these discussions is to understand how the Act applies to the potential LFP battery plant, and whether or not Tesla's EVs would be eligible for subsidies if they were fitted with CATL technology.
The U.S. Inflation Reduction Act also states that for EVs to be eligible for tax credits from 2027, 80% of the market value of critical minerals used in the battery must come from the U.S. or a country with which a free-trade agreement has been signed. Currently, such agreements have been signed with Canada, Mexico, and Japan, and negotiations are ongoing with the European Union.
Ford recently announced a similar deal with CATL, with plans to set up another LFP battery plant in the state of Michigan. The automaker intends to license the technology from CATL and receive technical assistance. Ford confirmed that CATL would not receive any U.S. tax dollars from the deal. Nevertheless, the deal still sparked controversy on Capitol Hill.
LFP battery stands for Lithium Iron Phosphate battery. It is a type of lithium-ion battery that uses lithium iron phosphate (LiFePO4) as the cathode material and a graphitic carbon electrode with a metallic backing as the anode. LFP batteries are capable of charging and discharging at high speeds compared to other types of batteries. They are also known for their long cycle life, high power density, and low self-discharge rate. Tesla has recently switched to LFP batteries in all standard-range cars.
If the agreement between Tesla and CATL goes through, it could resemble the one between CATL and Ford, with Tesla owning the plant and licensing the technology from China. However, it remains unclear whether or not the deal will go through at all.
Source: Bloomberg
