Tesla may need the help of Chinese battery technology to bring the future $25K Tesla to market and achieve mass U.S. car market penetration, says Morgan Stanley.
EV ‘Power Couple’: The U.S. electric vehicle market is still not realizing its potential due to the high price of EVs and, in particular, batteries, says Morgan Stanley. The solution: Tesla cooperation with Chinese battery giant CATL. “The US is an under-penetrated EV market in need of high quality, cheap battery tech,” said Morgan Stanley in a research note this past week. So, by striking a balance between national security issues and moving the U.S. EV market forward, “Tesla-CATL could be a game changer,” Morgan Stanley said. Bloomberg reported on March 25th that CATL and Tesla are “working on faster charging batteries” for the future $25K Tesla, often referred to as the “Model 2” by analysts. CATL is supplying machinery to Tesla’s factory in Nevada and the two are working together on battery technologies, according to Robin Zeng, the chairman of CATL, as cited in the Bloomberg story.
Model 2: While the U.S. and China may wrangle about national security issues and sound off with rhetoric to appease political interests, “ultimately we believe an ‘on-ramp’ to Chinese battery and EV partners will likely be required to drive higher US EV adoption,” Morgan Stanley said. “Tesla is working towards a $25k EV, and realizes that reaching mass EV adoption in the US is inextricably linked with China cooperation,” the research note added. CATL’s low-cost battery cells use lithium-iron-phosphate or so-called LFP battery cells. General Motors has also been in discussions with CATL for LFP battery tech (Electrek). CATL is effectively barred from selling into the U.S. directly but can license battery tech to partners and charge a royalty fee, Morgan Stanley said.
Mexico role in Model 2: Mexico could play a key role in brokering a ‘Westernized’ China-based EV supply chain, Morgan Stanley said. “The confluence of localized Chinese suppliers with Tesla’s Giga Mexico can help Tesla achieve Model 2 while also overcoming competing industrial and national security objectives,” the research note said.