Via Tesla
Tesla vehicles powered by batteries from China’s CATL, the world’s No. 1 battery maker, have recently been added to the list of U.S. subsidized vehicles, allowing CATL to indirectly benefit from the U.S. Inflation Reduction Act (IRA).
Earlier this month, the Tesla Model 3 Long Range AWD was added to the list of vehicles eligible for IRA subsidies, according to the U.S. Department of Energy. This brings the number of subsidized vehicles to 33, up from 32. The size of the subsidy was confirmed to be US$3,750.
Most notably, these vehicles are loaded with CATL batteries. Previously, the only car with a CATL battery to receive a subsidy in the United States was the Tesla Model 3 Standard Range RWD. Industry observers expect CATL to benefit indirectly from increased demand thanks to a drop in the retail price of the Tesla model even though such subsidies do not go directly to battery companies.
Some industry observers called into a question how CATL’s battery vehicles qualified for the subsidy program. According to IRA guidelines, in order to receive a US$3,750 subsidy each for a total of US$7,500, EVs must meet the following conditions: at least 50 percent of their battery parts are produced and assembled in North America, and at least 40 percent of their batteries’ key minerals were extracted or processed in North America or countries that have signed free trade agreements (FTAs) with the United States.
“We were surprised to see vehicles with CATL batteries included in the IRA subsidy list,” said a Korean battery industry official. “But I think it is inevitable based on the current criteria, as China is not on the list of foreign entities of concern right now.” Industry analysts believe that Tesla bypassed the IRA by purchasing key minerals directly and supplying them to CATL.
Korean battery makers are on alert, although they say, “It doesn’t really affect us right now.” This is because the United States implemented the IRA in order to keep China in check, but CATL indirectly benefited from it. CATL is taking a different approach to entering the U.S. market. Recently, it forged partnerships with U.S. automakers Tesla and Ford by transferring development and production expertise.
Meanwhile, CATL posted a 24.4 percent share of the non-Chinese EV battery market in the first four quarters of this year, according to market research firm SNE Research. The share represented an increase of up 4.7 percentage points from 2022. The Chinese battery giant was ranked second behind LG Energy Solution, which had a 28 percent share during the same period. However, the gap between the two companies has narrowed by 6 percentage points in the period, from 9.6 percent to 3.6 percent.