Australian lithium content material in batteries which might be made within the US and China could also be a significant component behind the current information that each one three US Tesla Mannequin 3 variants now qualify for the total $7,500 US IRA electrical car tax credit score.
Whereas the Mannequin 3 Efficiency already certified for full $7,500 credit score, till just lately the extra reasonably priced Commonplace Vary and Lengthy Vary variants solely certified for half that quantity. Analysts have speculated how Tesla managed to restructure its provide chain so that each one fashions now qualify. Australian lithium could also be a significant component.
The IRA EV tax credit score scheme consists of two elements. If 50% of the worth of battery elements have been produced or assembled in North America the EV qualifies for $3,750. If 40% of the worth of important minerals are additionally sourced within the US or a US FTA (Free Commerce Settlement) nation, the EV qualifies for the total $7,500.
In Might a complete report on world EV provide chains from Morgan Stanley confirmed that round 50% of the phrase’s lithium utilized in EV batteries comes from Australia.
Morgan Stanley says that in 2022, 94% of Australian lithium was allotted to China for battery making.
This implies it’s extremely doubtless that a big portion of the lithium going into CATL battery cells manufactured in China is coming from Australia. CATL is a serious provider of batteries for the US made Tesla Mannequin 3.
Based on the IRA regulation tips, automobile makers “may common the qualifying important mineral content material calculation over a restricted time period (for instance, a yr, quarter, or month) with respect to automobiles from the identical mannequin line, plant, class, or some mixture of thereof.”
In a current market replace paper this week Morgan Stanley posited that the rationale Tesla now qualifies for all Mannequin 3 variants could also be as a result of it’s producing sufficient fashions at its Fremont manufacturing unit that it could possibly offset the opposite fashions which have batteries sourced from CATL in China.
Nonetheless there could also be another excuse.
If nearly all of lithium in CATL battery cells produced in China is coming from Australia, these cells may theoretically qualify below the IRA tips for the second a part of the tax credit score. CATL battery cells are then despatched to Tesla factories within the US the place they’re assembled into full battery packs serving to bump up the native US manufacturing content material.
Canadian Tesla gross sales are actually coming from China that means the overwhelming majority of Tesla’s US manufacturing is destined for the US market, optimising the availability chain additional for IRA tips.
If CATL’s Australian lithium content material is certainly an element, the IRA is definitely incentivising Chinese language battery makers to supply their lithium from Australia to allow them to proceed suppling Tesla whereas nonetheless qualifying for the US EV tax credit.
EV YouTuber Sam Evens, AKA The Electrical Viking, thinks that is how Tesla is doing it.
Tesla’s entry stage Mannequin 3 qualifying for the total $7,500 IRA EV tax credit score is an absolute recreation changer for EV uptake within the US which is the world’s second largest automobile market.
With the entry stage Commonplace Vary Mannequin 3 beginning at $US40,240, the total federal tax credit score now brings its worth right down to $32,740. Including in California’s $7,500 Clear Automotive Rebate takes the acquisition worth down additional to simply $25,240.
That is cheaper than an entry stage Toyota Camry which begins at $26,320.
In California round 1.8 million automobiles have been offered in 2022 placing the state within the high 10 largest markets on this planet (if it was a rustic). 18.8% of all new vehicles offered final yr in California have been ZEVs, in response to the California Vitality Fee.
With a Tesla Mannequin 3 now cheaper to purchase than a Toyota Camry in California, EV uptake is now set to surge even greater as ditching ICE automobiles turns into an entire no brainer and Australian lithium is likely to be the important thing ingredient.
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Daniel Bleakley is a clear know-how researcher and advocate with a background in engineering and enterprise. He has a powerful curiosity in electrical automobiles, renewable power, manufacturing and public coverage.