Business Maverick

Business Maverick

Tesla to Cut Price on Chinese Model 3 With CATL Battery

An advertisement for the Tesla Model 3 is displayed at a dealership in Shanghai.

Tesla Inc. is set to launch its first Model 3 sedan equipped with cheaper batteries in China as soon as Thursday, allowing it to cut the cost of vehicles and boost sales in the world’s largest electric-vehicle market, people familiar with the matter said.

The mass-market Model 3s with the new batteries from a Chinese supplier will sell for 249,900 yuan ($36,800) after government subsidies, bringing the starting price of Tesla’s basic model down by almost 10%, one of the people said. The cheapest current models are 271,550 yuan after subsidies.

Tesla’s new powertrains are expected to include a cobalt-free lithium iron phosphate (LFP) battery made by Ningde, Fujian-based Contemporary Amperex Technology Co. Ltd. The battery has a cheaper mix of raw materials and could help Tesla compete with domestic and international rivals that are flooding the Chinese market with new models.

A representative for Tesla in China declined to comment.

The vehicles produced at Tesla’s Shanghai plant currently use nickel-cobalt batteries made by Panasonic Corp. of Japan and South Korea’s LG Chem Ltd. Cobalt is expensive because about half of the world’s supply comes from the Democratic Republic of Congo, where long-standing corruption and governance issues are compounded by the use of child labor in mining and high taxes on the metal.

The Palo Alto, California-based carmaker also is partnering with CATL, according to a February filing by the Chinese company. CATL is expected to supply batteries to Tesla, much as it already does to several global automakers including Daimler AG, Hyundai Motor Co., Toyota Motor Corp. and Volkswagen AG. CATL supplies different types of batteries to the various car manufacturers.

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LFP batteries cost about 20% less to make than nickel-cobalt battery cells, according to BloombergNEF.

Streets Ahead

Iron batteries will “still be good” for Tesla’s mid-range products, Chief Executive Officer Elon Musk said at his company’s Battery Day technology showcase earlier this month. He added Tesla doesn’t want to be constrained by limited production capacity for nickel-cobalt batteries.

Cumulative registrations this year of Chinese-made Model 3s, which debuted in January, reached almost 70,000 vehicles as of the end of August, according to state-backed China Automotive Information Net.

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