CATL postpones plans for new US plant again

Image: CATL

Chinese battery giant CATL has decelerated plans for new plants in North America. Media reports refer to new rules on battery material sourcing as the reason since these would drive cost higher.

Reuters news agency quotes two insiders concerned with the matter. CATL reportedly laid eyes on Kentucky, South Carolina and Mexico as potential sites for new battery plants. These could serve nearby clients such as Ford and BMW to assemble electric vehicles. Even Tesla was named at the time.

However, plans have since been set back twice. First, the controversial Taiwan visit by Nancy Pelosi, Speaker of the US House of Representatives, had seen CATL step back already this August, fearing repercussions amid growing tensions between Washington and Beijing.

This time, however, the company appears taking issue with the administration’s Inflation Reduction Act. The IRA requires carmakers to source 50% of critical minerals used in EV batteries from North America or US allies by 2024, rising to 80% by the end of 2026 – not the least to break any reliance on China for raw materials.

While the US government is offering incentives, also to CATL, the company is not alone in calling for some respite regarding the timeline. Reuters names executives from Volkswagen and Hyundai as also having urged lawmakers to allow them more time for the shift.

However, CATL, who has yet to comment, would be the first manufacturer to delay or forego a decision to build a plant in the US, if the insider information proves true. The Reuters sources said the new US rules on battery materials had become a “banana peel” that has slowed the company’s investment plans.

What is more, the rules would hike the costs of manufacturing batteries in the United States to a level higher than shipping them from China even if the US government offers subsidies for CATL to build the plants, reports Reuters with reference to a third person, who also asked not to be identified.

Whether CATL could pass on these higher prices to its potential customers is an open question. What is more, a battery manufactured in the US that nevertheless does not meet the eligibility specifications may not be very attractive for automakers.

Talking about access to resources, according to estimates from China, CATL’s installed production capacity could reach more than 670 GWh by 2025, even without the new US plant. By comparison, CATL produced cells with a volume of 170.39 GWh in 2021.

The dominant position in the manufacture of battery cells is also increasingly matched by control over the supply chain for raw materials. For example, the company has its own refining facilities in China for key materials such as cobalt and manganese.

US policymakers would like to see the dependency reversed and have chosen a mix of incentives and regulations to localise production, primarily through the IRA, and industry has followed suit.
A recent example is BMW, who this week said it would rely on AESC cells sourced in the USA, where BMW is pumping $1.7 billion into the production of electric cars. Cell supplier Envision AESC is building a cell factory in South Carolina and said the IRA would not “unduly” concern them. BMW is spending another 700 million dollars to build a new battery assembly centre in the nearby town of Woodruff to produce “at least six” fully electric BMW X models in the USA by 2030. Still, when announcing the plans, BMW CEO Oliver Zipse said “the United States should have a regulation that is not entirely unrealistic.”


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