Notebookcheck Logo

Tesla battery makers will ditch Chinese components to comply with EV subsidy conditions

LG may stop using Chinese materials for its batteries (image: LG)
LG may stop using Chinese materials for its batteries (image: LG)
Korean companies like LG and Samsung, which supply batteries for Tesla vehicles, are starting to clean their supply chain of China-made cathode and other battery materials. The move follows the new Inflation Reduction Act EV subsidy requirements for manufacturing in North America.

The recently passed US$740 billion bill on tax reform, climate change, and healthcare spending, collectively known as the Inflation Reduction Act, has an EV subsidy component for both new and used electric cars, but with caveats. To get the US$7,500 government rebate towards the purchase of a new electric vehicle in the US, automakers would have to clean up their supply chain from critical materials that are not sourced from the US or countries it has a fair trade agreement with.

Unfortunately, this requirement will be enforced as soon as next year, so if Tesla wants that its vehicles qualify for the Inflation Reduction Act subsidies, it has to start retooling its supply chain now. The reason is that the lion's share of battery-grade components and refined raw materials now come from China, so Tesla's suppliers would have to be weaned off their dependency on the global EV battery juggernaut.

This is precisely what Korean battery makers like LG, SK On, or Samsung are doing, according to local media. In order to comply with the Inflation Reduction Act conditions so that their big customers like Tesla could qualify for EV subsidies, the Korean conglomerates have started a "de-Sinicization" process of sorts across their supply chains.

In short, they will replace the China-sourced materials in four critical battery components - the cathode, anode, electrolytes, and separator - with domestic alternatives by companies like EcoProBM and POSCO Chemical, for instance:

Precursors are a basic raw material for cathode materials that are being imported from China, which accounts for more than 90% of the production. EcoPro Materials will expand its precursor production capacity from the current 50,000 to more than 200,000 tons by 2024 in response to the US restrictions on the use of Chinese precursors. EcoPro Material is also promoting to build a precursor production plant in North America in line with the move to build a battery supply chain in the United States.

Not only are the local firms planning to shake up their China-made battery materials sourcing by expanding their own production, but they also want to build factories in the US, which is another trend that the Inflation Reduction Act aims to spearhead.

As for how long will it take for LG, Samsung, and other Tesla battery or parts suppliers to "de-Sinicize," this remains to be seen, but Tesla and other automakers will likely urge them to hurry in order to qualify for the EV subsidies whose conditionality kicks in next year, and which are scheduled to run as far out as 2032.

Get the Tesla Motors 24' Cable Wall Connector on Amazon

Source(s)

Read all 4 comments / answer
static version load dynamic
Loading Comments
Comment on this article
Please share our article, every link counts!
.170
> Notebook / Laptop Reviews and News > News > News Archive > Newsarchive 2022 08 > Tesla battery makers will ditch Chinese components to comply with EV subsidy conditions
Daniel Zlatev, 2022-08-26 (Update: 2022-08-28)