Tesla may keep the Model 3/Y eligible for tax credits and gain M3P battery access with Ford's factory move

Currently, the standard range versions of Tesla's bestselling models use cheaper iron phosphate batteries made in China by the world's biggest EV battery maker CATL. Tesla recently warned that the base Model 3 and Model Y may lose their full US$7,500 new EV subsidy status when the Treasury Department releases its battery tax credit eligibility guidelines later today.

Since the standard range Model 3 and Model Y represent the majority of the cars it sells in the US, Tesla is reportedly probing the White House's opinion on entering a joint venture with China's CATL on US soil. The battery factory may be purposefully built for CATL's LFP and other superior technologies and may allow Tesla to keep the base Model 3 and Model Y in the government subsidy loop as the cells will be made in the US.

This is similar to the arrangement that Ford pushed through, as it wants to qualify for US$1.5 billion in annual subsidies, while still using the Chinese battery technology. Ford will own and operate the factory, while CATL provides the battery know-how and equipment installation. Tesla’s senior global director of public policy Rohan Patel was reportedly in the meeting with White House officials, seeking further clarification on the Inflation Reduction Act's points about battery raw material sourcing.

Back in December, the Treasury said it will postpone the final IRA implementation guidelines for March, as many a stakeholder - foreign and domestic - expressed dissatisfaction with the rules that made their EVs or batteries ineligible for subsidies.

According to insiders privy to the Treasury's discussions with them, the department's guidelines that are supposed to be released today will exclude some electric cars from tax credit eligibility. Tesla obviously thinks that the cheapest Model 3 and Model Y versions might be among them and is exploring avenues to loop them back in. The LFP battery factory location has not been decided, report the sources, but it will most likely be in Texas.

CATL has two other exciting battery technologies that will enter mass production this year. Both the M3P phosphate cells and the Quilin packs beat the energy density of the LFP and 4680 cells that Tesla currently uses for its vehicles at the same footprint and production cost. A Tesla factory for CATL's superior battery technologies in the US may give it access to all those novelties, and earn it billions in tax credits in the process, so it would be a rather favorable arrangement if Tesla manages to pull it off.

Get the Tesla Motors 24' Cable Wall Connector on Amazon