Tesla May Be Striking a Huge Deal With China to Bring LFP Battery Cells to the US

And it could boost EV production by over 500,000 EVs per year.
Brad Bergan
A Tesla Model 3 (left), and several LFP battery cells wired in series and parallel (right).1, 2

Despite mounting tensions, U.S. and China-based companies are making deals.

A company in China called Gotion High-Tech has landed a deal with a major U.S. automaker to supply lithium iron phosphate (LFP) battery cells, according to an unconfirmed report from Electrek.

This wouldn't in itself be overwhelmingly far-fetched, but there are signs that point to Elon Musk's Tesla as the major domestic automaker behind the deal.

And if that's the case, Tesla could be on the verge of a major boost in production by more than 500,000 EVs per year.

The China-based company may also jointly build an LFP battery factory in the US

Of course, a "large U.S. automaker" could be any one of several firms that have turned up the heat on electric car production. But, while Tesla isn't the largest U.S. automaker, it is the largest producer of electric vehicles by a substantial margin. Tesla employs LFP batteries in a handful of its vehicles, mainly its standard-range cars globally. But now it wants to increase LFP battery use in the United States. Electrek claimed to have a translation of a statement from Gotion, which read thusly: "Expansion and localization of production lines. U.S. Guoxuan agreed to allocate the company's existing or new domestic to build production capacity and build new production capacity in the United States to meet the customer's battery procurement needs."

If this is real and accurate, LFP battery cells will initially be shipped from China, before manufacturing facilities are completed in the U.S. The report comes from a recent filing with the Shenzhen Stock Exchange, which states that the Chinese company has entered an agreement to provide at least 200 GWh of LFP battery cells to a "large U.S. automaker" sometime between 2023 and 2028. Volkswagen holds stock in Gotion, which would make it a suspect in the search for this major partner. But, obviously, Volkswagen isn't an American automaker, which rules it out. The report also says that a jointly-ventured LFP battery factory between the U.S. company and Gotion could take place, not unlike how Tesla and Panasonic joined to operate the Nevada Gigafactory.

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Tesla fits the description and could use 200 GWh battery cells

"Joint venture to build a factory: The two parties will conduct friendly consultations on the establishment of joint ventures or other cooperative efforts," read the report's rough translation of the filing from China. "Jointly explore the possibility of establishing a joint venture company. In addition to the joint venture to build battery production bases, the scope of joint ventures. The scope may cover investments in upstream materials and downstream battery recycling industries." Obviously, this language is fragmentary and vague, at best. But since the China-based firm described a new partnership, the deal itself could be real.

And since Tesla actually is the largest EV automaker in the U.S., also satisfies the condition in the filing that the company also uses battery cells for "other applications," and, since Tesla would, without doubt, put 200 GWh of battery cells to use in the near-term, placing your bets on Tesla as the recipient of this partnership is by no means a hail-mary. But, amid rising tensions between the two countries, such a partnership could become very complicated. Only time will tell whether Gotion's partner is Tesla, and whether such a partnership could withstand the strains of open conflict, should it happen.

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