Tesla Will Start Using Cobalt-Free Batteries for its China-Built Model 3, Reports Say

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【Summary】Tesla is ready to start building some Model 3 vehicles in China equipped with more affordable cobalt-free lithium iron phosphate (LFP) batteries, two people familiar with the matter said. In June, Tesla received government approval to build its Model 3s in China using the LFP batteries.

Eric Walz    Nov 06, 2020 11:05 AM PT
Tesla Will Start Using Cobalt-Free Batteries for its China-Built Model 3, Reports Say

Although Tesla is riding high as the world's most valuable automaker, the California company remains focused on expanding its presence in China, which is the world's biggest auto market. Part of that strategy is to produce more affordable electric cars using cobalt-free lithium iron phosphate (LFP) batteries, which cost less to produce.

According to sources that spoke to Reuters, Tesla is ready to start selling some Model 3 vehicles built in China using more affordable cobalt-free lithium iron phosphate (LFP) batteries, two people familiar with the matter said. 

Tesla may announce the production change as early as Thursday, the two sources said who declined to be identified since the matter is confidential.

Reuters reported in June that Tesla would use LFP batteries made by China's Contemporary Amperex Technology Limited (CATL). At the time, Tesla received government approval to build Model 3 vehicles using LFP batteries, according to a document on the Ministry of Industry and Information Technology website.

CATL is one of the biggest suppliers of batteries to the auto industry. The company has already formed a strategic partnership with German automaker Volkswagen to supply the batteries for millions of EVs the automaker plans to build over the next decade. Many of these models will be sold in China. 

Currently Tesla is using nickel-manganese-cobalt (NMC) batteries in its Model 3 sedans built at its Shanghai factory. The starting price for these vehicles is currently 271,550 yuan ($39,900) after factoring in government subsidies, which is still more expensive than vehicles from Tesla's chief rivals in China, including rising EV startup Xpeng Motors.

The Xpeng Motors fully-electric G3 SUV starts at 149,800 yuan (US$22,059) after subsidies.

LFP batteries cost less to produce and contain no cobalt, one of the most expensive metals used in electric vehicle batteries. Batteries containing cobalt increase the price of an electric vehicle. The battery pack is equal to roughly 25% of the selling price.

Tesla's longer range Model 3s in China however will still use the standard NMC batteries. The LFP will be used for the standard range Model 3s, according to the sources. The standard range Model 3 on sale in China has an advertised range of 276 miles (445 km) with the NMC batteries.

Tesla sold over 11,000 electric vehicles in china during the month of August. Most of the vehicles were Model 3s. 

During Tesla's Battery Day event on Sept 22, Chief Executive Elon Musk said that Tesla intends to build a more affordable $25,000 electric car. LFP batteries will allow Tesla to build the Standard Range Model 3 more cheaply.

However, one of the drawbacks to LFP batteries is that they are less energy dense, which translates into less range between charges. So if Tesla were to offer a lower-priced Model 3 in China using LFP batteries it will likely have a shorter range of under 250 miles.

CATL inked a two-year deal in February to supply batteries to Tesla for its vehicles built in China. Previously, Tesla worked with Japan's Panasonic Corp. and South Korea's LG Chem to produce EV batteries. Panasonic is Tesla's battery partner for its U.S.-made vehicles.

Musk wrote in a letter to shareholders in May 2018 that the company would eventually reduce the use of cobalt to "almost nothing."

resource from: Reuters

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