Tesla Inc. is looking to build a new battery factory in the United States and is partnering with Chinese battery giant CATL, an arrangement that could spark controversy in the U.S., people familiar with the matter said.
Tesla has discussed with the White House in recent days plans to build a plant involving CATL, people familiar with the matter said. Tesla representatives want the White House to clarify provisions in the Inflation Reduction Act that the Biden administration is finalizing this week. Rohan Patel, Tesla’s senior global director of public policy, was involved in the discussions.
Tesla hopes to strike a deal similar to Ford’s partnership with CATL to build a plant in the U.S. that is wholly owned by the company. Last month, Ford announced it would use CATL’s technology to build a battery plant in Michigan, USA. Tesla is currently in expansion mode, using its $22 billion in cash to increase production and reduce costs in response to growing competition. CATL, which is key to Tesla’s plan, makes lithium iron phosphate batteries, a chemistry that is cheaper than the nickel batteries used in the West.
Tesla is considering building a new battery plant in Texas to supply batteries for an electric car assembly plant there, though the exact location has not been determined, people familiar with the matter said. Similar to Ford’s deal structure, Tesla would own and operate the plant while licensing the technology from CATL.
Right now, the U.S. auto industry has been lobbying to influence how the U.S. Treasury Department interprets the requirements in President Biden’s signature climate package. The law aims to wean the U.S. off its dependence on Chinese battery materials by incentivizing the U.S. electric vehicle supply chain. One specific provision that has been strongly lobbied for is 30D, which seeks to withhold consumer tax credits for electric vehicles with a certain amount of China-related materials in their batteries.
However, Ford’s proposed partnership with CATL has been opposed by lawmakers including Democratic Sen. Joe Manchin of West Virginia and Republican Sen. Marco Rubio of Florida. They argued that the partnership would allow Ninted to benefit from U.S. subsidies. Ford said CATL will not receive any U.S. tax money from the deal. Barclays analyst Dan Levy said in a research note that Tesla’s deal with CATL could be met with some political resistance, similar to what Ford has seen.
Tesla, the White House, CATL and Patel have not yet commented.
