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Tesla and CATL Pursuing U.S. Battery Plant: Will These Be M3P Batteries?

A report from Bloomberg shows Tesla in talks with the White House about battery sourcing requirements and CATL, from China, coming to the U.S. to build a battery manufacturing plant.

Tesla and CATL

Tesla is pursuing a U.S. battery facility with CATL and has discussed these plans with White House official recently, according to Bloomberg. It's good that the White House and Tesla are talking because it seems like the two groups generally aren't talking that much for various reasons.

Tesla has most likely gone to speak with the White House in order to get clarity on the IRA (Inflation Reduction Act), which gives tax credits to the purchases of electric vehicles. My guess is that Tesla is going to be disappointed with a reduction or elimination of the tax credit for the Model 3 RWD because its batteries are made in China by CATL.

However, all is not lost as Tesla needs as many batteries as they can get regardless of the tax credit and Tesla also is smart enough to know that manufacturing these in the U.S. will ensure the tax credit, which is why this announcement is coming out most likely.

CATL is a dominant player for batteries and in particular, LFP batteries. LFP batteries are the primary batteries used for Energy storage for the grid because they don't need to be Energy dense or high performing - they just need to store energy.

They are also used in the base Model 3 RWD and the base Model Y - though that vehicle isn't sold in the U.S. yet. These batteries could also be used in Tesla Bot due to their long-lasting nature.

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Future of LFP Batteries

Right now, there really isn't a more important battery technology than LFP batteries. This is because they are low cost and long-lasting. Until something comes along that beats these two criteria, I see LFP batteries being used for a long time in standard range vehicles and in Energy storage.

I see Tesla and China (in particular CATL) as having a very synergistic relationship. People want Tesla vehicles, and China would be crazy not to have Tesla as a partner in the EV revolution. I think we'll see more announcements between Tesla and CATL as the years go by.

The question is if these batteries will be M3P batteries - the new type of battery that CATL has developed that could supposedly give the Model 3 RWD around 300 miles of range. That would be a big deal to bring a battery plant to the U.S. that makes that.

Of course, even if that happens, Tesla could opt to simply put less battery in the car and have the car be made for less and possibly cost less. I see Tesla taking that route most likely.

What do you think about CATL bringing battery manufacturing to the U.S.? Is this a good idea?

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Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter or LinkedIn to stay in touch and follow his Tesla news coverage on Torque News.

Image Credit, Tesla, Screenshot