Tesla (TSLA.O) is in between advanced levels of talks to use batteries manufactured by CATL (300750.SZ) that have no cobalt. It is one of the most costly metals in electric vehicle (EV) batteries. Tesla will use those batteries in cars manufactured at its China plant, according to people familiar with the matter.
First time for Tesla
The adoption would register the first time for the U.S. automaker to integrate so-called lithium iron phosphate (LFP) batteries in its chain of cars, as it wishes to reduce production costs amidst stuttering overall EV sales in China.
Tesla has been in talks with the Chinese manufacturer for over a year to provide LFP batteries that are going to be inexpensive as compared to its existing batteries by a “double-digit percent,” according to a person directly involved in the matter, who was not permitted to speak with media and so refused to be identified.
Contemporary Amperex Technology Co Ltd (CATL) and Tesla Inc refused to comment.
Electric Vehicle manufacturers ideally utilize nickel-cobalt-aluminum (NCA) or nickel-manganese-cobalt (NMC) batteries in passenger vehicles as they carry higher energy density, which is crucial in identifying how much distance an EV, can cover on a single charge.
To bolster the safety and density of its LFP batteries, CATL has been working on its so-called cell-to-pack technology, according to a report from Reuters.
The extent of Tesla’s intentions was not clear regarding the use of LFP batteries however, the automaker has no plans to stop utilizing its current NCA batteries, said one of the people.
Completing the Promise
Tesla has been escalating up production of its Model 3 cars at its freshly constructed $2 billion Shanghai plant and slashing prices to win market share from conventional premium automakers such as Germany’s BMW AG (BMWG.DE) and Daimler AG (DAIGn.DE).
Tesla began to deliver cars from the factory in December, helping it save on shipping costs and taxes for imported models. Right now, it is searching regulatory approval to manufacture longer-range Model 3 cars at the plant.
Sales in China of latest energy vehicles (citing to battery-only, plug-in hybrid and fuel-cell vehicles) likely decreased by 54.4% in January, according to industry data, due in part to the Lunar New Year holiday beginning earlier than last year as well as the effect of the outbreak in China of a new coronavirus.
Also, the use of LFP batteries is going to help Chief Executive Elon Musk complete a 2018 promise that Tesla would cut the use of cobalt – which costs some $33,500 a tonne – to “almost nothing”.
Tesla is planning to host a battery event, probably in April, to exhibit its future battery strategy and technology, Musk said at an earnings conference in January.
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