22 Mar 24

Tesla and CATL to expand cooperation amidst rapidly changing US strategy

Two giants of the global electric vehicle (EV) market are eager to expand cooperation for mutual benefits, but the national electrification strategy of the US government may change plans. 

According to the Chinese media, Tesla and CATL are working on a new battery called M3P and plan to use it on Tesla vehicles, but there is no confirmation yet. On the other hand, local media reports say CATL has already begun testing the battery on a vehicle jointly developed by Chery (a state-owned auto manufacturer). The full-electric Luxeed S7 will be the first battery-electric vehicle (BEV) with M3P. 

The idea of using an M3P lithium-ion phosphate (LFP) battery surfaced again last year in the Chinese media, which claimed that Tesla plans to use the battery to boost the range in the Tesla Model 3 Project Highland edition. 

CATL said the M3P battery will go into mass production and use in 2023. During 2022, there were reports that the new battery would be installed in the Tesla line-up in China, including the new Model Y, but no announcement verifying these statements came last year. However, the M3P battery debuted with the Luxeed S7, produced by Chery and Huaewii and launched in November 2023. 

Most recent reports say that CATL and Tesla are still developing the M3P battery, and it is unclear when they will be used in Tesla cars in China. 

Still no M3P in the new Model 3

According to Teslarati, 'Project Highland' has been on Tesla's agenda since Q2 2022. In November of that year, Reuters revealed that Tesla was working on an upgrade to the Tesla Model 3, which would result in a different powertrain and exterior design. Reports on M3P indicate that the upgrade includes the battery, intended to increase the China-sold Tesla Model 3 capacity from 60 kW/h to 66 kW/h. 

In 2022, CATL said the new LFP battery design has around 15% higher density than the current LFP batteries with 210 Wh/kg (watt-hour per kilogram). The M3P battery is expected to provide 700 km charge on a single charge, whereas the Model 3 RWD (rear-wheel drive), sold in China, ranges around 556 km. The M3P battery uses the ternary design, interacting with a positive electrode of three elements. For the M3P, lithium-iron-phosphate (LFP) is highly favoured. Yet, there still needs to be more clarity about the cathode and anode materials of the M3P battery. 

LFP batteries use lithium iron phosphate as the cathode material and graphite or other carbon materials for the anode. According to the most recent reports, the M3P cathode material comprises ternary lithium and lithium manganese iron phosphate, increasing durability and internal resistance. 

In June 2023, it was rumoured that the new Model Y and the Model 3 Highland would be equipped with the M3P battery. Model 3 Highland was released in Europe and several parts of the world in August 2023 and the US in January 2024. The specs for the two models are:

2024 Tesla Model 3 Highland
Model Rear-wheel drive Long Range 
Battery 57.5 kW/h  (271 hp) 75 kW/h (349 hp)
Range (EPA)* 437 km 576 km
Range (WLTP)** 513 km 629 km
Charging speed  Up to 282 km in 15 minutes Up to 282 km in 15 minutes
Max power input 170 kW  250 kW
*U.S. Environmental Protection Agency
**Worldwide Harmonised Light Vehicle Test Procedure


Tesla is building on the technical know-how

According to Bloomberg, the LFP chemistry-based battery plans will pick up speed as CATL plans to establish a small LFP battery cell facility in collaboration with Tesla in Nevada. The report does not provide insight into the partnership, but it says CATL engineers will only be involved in setting up the equipment, and Tesla will manage the factory and take care of all the costs. 

This is a critical move for Tesla. While the EV giant has reached mass production for its lithium-ion NCM (nickel-cobalt-manganese) battery with Panasonic, the LFP chemistry is enabled for the first time in North America through the strategic partnership with CATL, boosting Tesla's technical know-how. The new facility is expected to produce LFP battery cells for Tesla Megapacks, the massive, stationary energy storage units. 

Political unease 

It is not only Tesla that is keen on mastering LFP battery technology. In February 2023, Ford announced a $3.5 bn investment to establish an LFP plant with CATL's support in technical know-how. Following this development, the Select Committee on the Chinese Communist Party asked for details for the Ford-CATL collaboration, stating that 'US taxpayer dollars should support domestic manufacturers, not foreign entities', according to Reuters. Under the Inflation Reduction Act (IRA), launched in 2022, the US government aims to focus entirely on the local supply chain. 

In November 2023, Ford decided to shrink the initially announced investment by 40% for the planned factory. 

According to Reuters, in September 2023, the US House Committee on Ways and Means demanded information from CEO Elon Musk about whether Tesla has contracts with CATL or is considering having contracts. Apparently, the US government is strict about collaborating with Chinese companies. Still, the strong ties between Tesla and CATL and the role of the Chinese EV ecosystem in the global supply chain are also apparent. 

The US government's policy is also paying off. In February, Duke Energy, an electric and natural gas supplier with over 8 million customers, announced that it would nullify its partnership with CATL in military and civilian energy storage technologies and use domestic suppliers. 

CATL's share in the global EV battery market rose to 37.4% in November 2023 from 36.9% in October, with an increasing number of partners worldwide, including BMW, Volvo, Li Auto, Toyota, Volkswagen, Hyundai and NIO. 

It appears that geopolitics will continue to influence US-Chinese EV relations. The rising question is how the US will be able to flourish the domestic supply chain without the cheaper Chinese technology. The road to domestic transformation may not be cheap or short, but it is a crucial goal nonetheless. 

The main photo is courtesy of Tesla.

Authored by: Mufit Yilmaz Gokmen