The automaker plans to purchase machinery from CATL and install it in Tesla's Gigafactory 1 in Sparks, Nevada. This new facility will be fully controlled by Tesla, which will cover 100 percent of the costs of the construction, and CATL personnel will allegedly be uninvolved other than helping set up the equipment.
The plant, which will make cells for Tesla's large-battery Megapack product, is part of a broader effort to onshore the supply chain for lithium-iron-phosphate cells in America, according to a person familiar with the plan. Tesla also sees the equipment-purchase arrangement as a cost-effective way to set up new facilities, the person said. (Related: ELON UNMASKED: Tesla bigwig Elon Musk reaches out to CCP officials during short visit in China.)
The electric automaker will buy idle equipment to make batteries from its Chinese supplier CATL, adding that the plant will have an initial capacity of about 10 gigawatt hours.
The move comes as regulation in the United States curtails companies from depending on countries such as China to source materials used in batteries such as nickel, cobalt and lithium.
This year, Tesla's cheapest car, the Model 3 compact sedan, lost tax credits for the purchase of EVs under the Inflation Reduction Act of President Joe Biden, as new regulations on sourcing of battery materials kicked in.
Alongside plans for the new facility, Tesla has said it intends to double capacity this year at an existing battery factory in Lathrop, California. The efforts support Musk's assertion that Tesla’s energy-storage operations would grow faster than its electric car business this year. Megapack is the company’s battery intended for utilities.
CATL, the world’s biggest maker of EV batteries, dominates the market for so-called LFP (lithium iron phosphate) batteries, which are cheaper and more stable than nickel-based alternatives. China’s electrified-car market is projected to slow for a second year in 2024 as the nation’s patchy economic recovery from the pandemic weighs on consumer sentiment.
China expanding influence in EV market
The move comes amid heightened scrutiny by U.S. lawmakers and the Biden administration of technology collaboration with China in a number of fields, including production of batteries. Tesla's purchase may sidestep criticism about U.S. companies' dependence on Chinese partnerships because of CATL’s minimal involvement.
Biden's Inflation Reduction Act was designed primarily to offset China's dominance of lithium-ion battery production worldwide. As per the New York Times, a switchover to sodium-ion batteries may make the East Asian nation's control over battery manufacturing even greater, reported NaturalNews.com.
Meanwhile, consulting firm Benchmark Minerals revealed that of the 20 sodium battery factories planned or already under construction around the world, 16 are in China. By 2025, the communist country will have nearly 95 percent of the global capacity to make sodium batteries.
However, experts are seeing one problem for China. The nation controls much of the sources of lithium worldwide but has little access to soda ash, which is the main source of sodium. The U.S. accounts for over 90 percent of the world's readily mined reserves of soda ash. In fact, beneath the southwestern Wyoming desert, there is a vast deposit of soda ash that was formed 50 million years ago.
China currently houses the largest manufacturers of LFP batteries, including BYD and CATL, which supply Tesla. Panasonic partnered with Tesla on the Gigafactory in Nevada with investments in the production equipment, which the Japanese supplier uses to manufacture and supply the EV maker with cells.
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