Tesla cozying up to China's CATL for a new Megapack battery industry cluster

Tesla has now made the last of its giant battery Megapacks for energy storage at Giga Nevada, and is moving their production to the Megafactory in Lathrop, California. There, they will be replaced with the more efficient Megapack XL version that has much lower production costs per unit of capacity.

The other new Megapack facility that Tesla is planning to open is in China, and it recently posted the signing ceremony for the project there. Soon after the ink on the Shanghai Megafactory papers dried, Elon Musk reportedly went straight to the world's biggest battery maker CATL to probe it for a partnership on a local industry cluster. The 40 GWh Megafactory will need a lot of the cheaper, safer LFP batteries that CATL can produce shiploads of, and Tesla plans to use the number one cell maker for its energy storage expansion ambitions in China.

Tesla will have to overcome a lot of regulatory red tape in the highly centralized electric grid distribution system in China in order to ensure the future market for its Shanghai Megafactory production, so partnering with local battery makers makes sense from a business perspective. The Megafactory is expected to start churning out 10,000 Megapacks annually in Q2 of next year.

CATL already supplies the LFP cells in the base Model 3 and Model Y versions which on US soil precludes them from getting the full US$7,500 new EV tax credit. In China, however, the tables turn in favor of cozying up to  the local supply chain with the added bonus that juggernauts like CATL or BYD can produce everything battery in a cheaper and faster manner than anywhere else, at least for the time being.

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