Tesla looks to pave the way for Chinese battery makers to come to U.S.

Electric Last Mile Solutions

21/10/2021 14:27

By Hyunjoo Jin and Subrat Patnaik
    Oct 21 (Reuters) - Tesla Inc  TSLA.O  wants to shift to a
less expensive battery for its electric vehicles but first needs
to figure out how to overcome political tensions to get a
Chinese partner to build the iron-based batteries near its U.S.
factories.
    The world's two biggest economies have yet to resolve
disputes over tariffs, intellectual property rights and Chinese
incursions into Taiwan's air defense identification zone. And
China's sweeping regulatory crackdown, aimed largely at the
technology sector, could pose yet another hurdle.
    China dominates the production of iron-based batteries
thanks to a series of key patents, which have allowed the
country to make 95% of the world's Lithium Iron Phosphate (LFP)
batteries.
    However, these patents expire soon and Tesla said it plans
to adopt LFP batteries in its fleet of standard-range vehicles
globally and move battery production https://www.reuters.com/business/autos-transportation/tesla-beats-quarterly-revenue-estimates-2021-10-20
 closer to its factories.  urn:newsml:reuters.com:*:nL4N2RG3YR
    "Our goal is to localize all key parts of the vehicles on
the continent," Drew Baglino, senior vice president of
powertrain and energy engineering at Tesla, told investors.
Tesla is building factories in the United States and Germany.
    "We're working internally with our suppliers to accomplish
that goal, and not just at the end-assembly level but as far
upstream as possible."
    The company did not provide additional details about the
decision and was not immediately available to comment.
    LFP technology is considered to be cheaper and safer than
nickel-based batteries, although they lack the same energy
density as nickel-based ones to allow cars to travel farther on
a single charge.
    The technology has garnered interest from EV makers and
Reuters reported https://www.reuters.com/world/china/exclusive-apple-talks-with-catl-byd-over-battery-supplies-its-electric-car-2021-06-08
 in June that Apple Inc  AAPL.O  is in early stage talks with
China's CATL  300750.SZ  and BYD  002594.SZ  to get LFP
batteries for its planned electric vehicles and wants them to
build factories in the United States.  urn:newsml:reuters.com:*:nL2N2NQ0AE
    But CATL is reluctant to build a factory in the country due
to political tensions between Washington and Beijing as well as
cost concerns, people said at that time.
    "You cannot discount the whole geopolitical aspect of it,"
Sanjiv Malhotra, founder of battery startup Sparkz and former
U.S. Department of Energy executive, told Reuters.
    "Our customers, they do not want to be caught in this
political crossfire," said the U.S. startup, which is looking at
setting up production lines to challenge China's dominance.
    CATL is probably better off manufacturing in China, as that
is where they have access to the world's lowest-cost materials,
Roth Capital analyst Craig Irwin said.
    "A U.S. facility would need a better U.S. supply chain to
get similar to the low cost available in China."
    President Joe Biden has made it a priority to support the
rollout of electric vehicles to combat climate change, but
battery constrains could remain a key hurdle to his ambitious
plan.
    China is the largest global EV market and dominates the
supply chain for the manufacture of lithium-ion batteries,
including the processing of minerals and raw materials.
    Electric Last Mile Solutions Inc (ELMS)  ELMS.O , a
commercial electric vehicle company which currently imports
CATL'S battery packs, is in talks with the company about the
possibility of sourcing batteries at CATL's potential U.S.
factory.
    Last year, CEO Elon Musk said Tesla would use LFP batteries
for its China-made Model 3, saying the move would free up
battery capacity for the Semi truck and other vehicles that
require higher-density, long-range batteries based in nickel.
    Since then, Musk has pledged to use the tech in more
products.
    The company is facing higher costs primarily due to rising
prices of cobalt, nickel  CMNI3  and aluminum  CMAL3 . Tesla
uses these materials to make its batteries.

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Tesla says new factories will need time to ramp up, posts record
revenue      urn:newsml:reuters.com:*:nL4N2RG3YR
EXCLUSIVE-Apple, Chinese manufacturers in talks on U.S. car
battery factory -sources      urn:newsml:reuters.com:*:nL2N2NQ0AE
BREAKINGVIEWS-Elon Musk’s promises are getting more realistic   
 urn:newsml:reuters.com:*:nL1N2RG2BG
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 (Reporting by Hyunjoo Jin in San Francisco and Subrat Patnaik
in Bengaluru; Editing by Lisa Shumaker)
 ((hyunjoo.jin@thomsonreuters.com; 82-2-3704-5685; Reuters
Messaging: hyunjoo.jin.thomsonreuters.com@reuters.net))