Tesla to Cut Price on Chinese Model 3 With CATL Battery

(Bloomberg) -- Tesla Inc. launched its first Model 3 sedan that people with knowledge of the matter said is equipped with cheaper, Chinese-made batteries, allowing it to cut the cost of cars and boost sales in the world's largest electric-vehicle market.

The mass-market Model 3s will sell for 249,900 yuan ($36,800) after government subsidies, bringing the starting price of Tesla's basic model down by almost 10%. The car will have a range of 468 kilometers (291 miles) on one charge.

The cheapest current models are 271,550 yuan after subsidies. A Model 3 car with a longer range of 668 kilometers will start from 309,900 yuan, Tesla said on its website on Thursday.

Tesla's new powertrains are expected to include a cobalt-free lithium iron phosphate (LFP) battery made by Ningde, Fujian-based Contemporary Amperex Technology Co. Ltd., the people familiar said, asking not to be identified because those details are private.

The battery has a cheaper mix of raw materials and could help Tesla compete with domestic and international rivals that are flooding the Chinese market with new models.

A representative for Tesla in China declined to comment specifically on the battery. But after the prices were changed on its website, Tesla released a statement saying the new Model 3 benefits “from advanced software technology and efficiency improvement.”

The vehicles produced at Tesla's Shanghai plant have thus far used nickel-cobalt batteries made by Panasonic Corp. of Japan and South Korea's LG Chem Ltd. Cobalt is expensive because about half of the world's supply comes from the Democratic Republic of Congo, where long-standing corruption and governance issues are compounded by the use of child labor in mining and high taxes on the metal.

The Palo Alto, California-based carmaker also is partnering with CATL, according to a February filing by the Chinese company. CATL supplies different types of batteries to various other car manufacturers, too, including Daimler AG, Hyundai Motor Co., Toyota Motor Corp. and Volkswagen AG.

LFP batteries cost about 20% less to make than nickel-cobalt battery cells, according to BloombergNEF.

Iron batteries will “still be good” for Tesla's mid-range products, Chief Executive Officer Elon Musk said at his company's Battery Day technology showcase earlier this month. He added Tesla doesn't want to be constrained by limited production capacity for nickel-cobalt batteries.

Cumulative registrations this year of Chinese-made Model 3s, which debuted in January, reached almost 70,000 vehicles as of the end of August, according to state-backed China Automotive Information Net.

©2020 Bloomberg L.P.

With assistance from Bloomberg