Tesla pits BYD vs CATL for cheapest Megapack energy storage LFP batteries
Tesla is building its first Megapack energy storage factory outside the US in Shanghai, and playing suppliers against each other to get more favorable cell prices.
When completed, the Tesla Megapack factory in China is expected to produce 10,000 commercial energy storage batteries. At 3.9 MWh capacity each, Tesla's Megapack plant in Shanghai will have a total annual capacity of about 40 GWh.
To achieve better economies of scale and lower costs against the formidable energy storage competition in China, Tesla has reportedly signed a contract with BYD for LFP cells supply.
The fact that Tesla co-opted its global EV archrival as Megapack battery supplier shows that it wants to diversify away from the world's largest battery maker, CATL.
CATL has been an exclusive source of LFP cells for Tesla's energy storage and EV business, but recently it unveiled its own Tianheng container storage system with record 6.25 MWh capacity.
Its LFP cells come with 430 Wh/L energy density and 20-year capacity-retention warranty. CATL even offers a 5-year zero-degradation warranty now.
The Megapacks come with a 15-year capacity-retention guarantee, so by using CATL's LFP cell technology, Tesla may be able to up its Megapack warranty.
BYD, which also has novel LFP battery technologies and has an energy storage business, apparently gave the lowest Megapack cell price, selling almost at cost to gain Tesla's business.
As a result, it will supply 20% of the LFP batteries that Tesla will package and sell as 3.9 MWh Megapack container storage boxes when its Shanghai factory is completed next year.
Competition and technological advancements have brought LFP power station battery prices down 35% since last year, and they currently hover at their lowest ever level of about $0.05/Wh in China.
Besides energy storage, Tesla is also playing BYD against CATL for its electric car business, but not in the US, where using Chinese batteries is a strike that makes vehicles like the Model 3 RWD ineligible for federal tax credits.
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