CATL LFP Batteries are supposedly having expiring patents. Why this is good for all EV makers and especially Tesla.
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CATL LFP Batteries - Expiring Patents
CATL is having its LFP battery patents expire and this will be a good thing for all EV auto makers, especially Tesla. Tesla is going to slowly unwind itself from using CATL batteries and begin to produce its own in-house.
Tesla can make its own cells and has the chance to reduce its Cost Of Goods Sold by about 25% - if you take the $45 per KWh wholesale markup CATL is earning from Tesla.
CATL currently controls about 1/3 of the global battery market and is on good terms with Tesla, however. Tesla could keep its partnership and ask for lower prices on the batteries. To reach 20 million vehicles per year, Tesla is going to have to make a lot of its own batteries, or continue to partner with CATL.
LFP batteries are used only for standard range vehicles that don't need a lot of performance and power. My own Tesla Model 3 RWD has LFP batteries and they can be charged to 100% regularly - that's why I like them.
CATL having its patents expire means others can now begin manufacturing their own LFP batteries in their own way using CATL's approach. However, CATL has years of experience and expertise and it is probably not so simple to just copy and replicate what they are doing.
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Why This is Good for Tesla
Still, this is good for Tesla because Tesla can begin the process of unwinding itself from CATL. It's all about reducing costs over time and eliminating (eventually) a 3rd party supplier of batteries will help Tesla increase its margins and/or lower the cost of its vehicles. Both are a win.
Tesla will likely also make their own LFP batteries for its Megapack product which is going to be a big surprise to people in 2023. Tesla's Lathrop factory is ramping to be able to produce 10,000 Megapacks for a year.
There have also been a few Twitter comments suggesting that the LFP battery patents were created in the U.S. and that CATL has not honored them. In the end, it all comes down to Tesla making their own LFP batteries because of the strong demand for standard range vehicles and its Megapack.
I see Tesla making more factories in the U.S. and North/South America to produce LFP batteries. They are such an important part of EVs and stationary storage with batteries to stabilize the grid. And, they can be charged to 100% state of charge, regularly, reducing the confusion about charging.
What do you think of CATL and Tesla? Will Tesla start to make its own LFP batteries and reduce its dependence on CATL?
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Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter or LinkedIn to stay in touch and follow his Tesla news coverage on Torque News.
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