Tesla, the electric car manufacturer, is expanding its operations in the United States, particularly focusing on battery production. Traditionally, Tesla sources battery materials like lithium, nickel, and cobalt from China due to their scarcity in the U.S. However, the U.S. government encourages Tesla to prioritize local resources and adopt lithium iron phosphate (LFP) batteries, known for being cost-effective and safer.
To facilitate the production of LFP batteries, Tesla has acquired equipment from the prominent Chinese company, Contemporary Amperex Technology Limited (CATL), a major LFP battery manufacturer globally. This move aligns with Tesla’s goal to enhance its battery factory, the Gigafactory, in Sparks, Nevada, where batteries for Tesla cars are produced in collaboration with Panasonic.
Tesla aims to shift towards producing more LFP batteries at the Gigafactory, starting with an ambitious target of 10 billion watts per year, sufficient to power approximately 166,000 cars. The company envisions utilizing LFP batteries for the Model 3, a more affordable electric car priced at around $40,000.
However, a hurdle arises as changes in U.S. government rules stipulate that only electric cars using locally sourced battery materials qualify for tax credits. As the Model 3 currently relies on battery materials from China, Tesla’s strategy to manufacture LFP batteries in the U.S. aims to regain eligibility for the tax credit, enhancing the affordability of their electric vehicles.
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