CATL, the world's largest EV battery manufacturer, might slow down its investment plans related to the first lithium-ion cell gigafactory in North America.
According to earlier reports, the Chinese company was planning a large battery plant in Mexico and/or the US, but US-China tensions and the new Inflation Reduction Act (IRA) might impact the plans.
Reuters' unofficial sources say that CATL slowed down preparations for the investment in North America due to the IRA's restrictions on sourcing EV battery materials, which are expected to significantly increase costs.
Let's recall that IRA requires manufacturers to increase the share of North America (or US allies) sourced critical minerals in EV batteries to 50% by 2024 and 80% by the end of 2026.
According to the report, this change prompted the company to at least double-check its business plan:
"...CATL executives have slowed the process of vetting sites for potential new plants in North America since late August when the United States imposed tough new restrictions on the sourcing of material used in EV batteries, two people, who spoke on condition they not be named, told Reuters."
"The rules would hike the costs of manufacturing batteries in the United States to a level higher than shipping them from China even if the U.S. government offers subsidies for CATL to build the plants, said a third person, who also asked not to be identified."
CATL did not immediately respond to Reuters's request for comment, but the report does not sound unrealistic.
Rumors indicate that besides Mexico, CATL was interested in building a battery gigafactory in South Carolina or Kentucky. North America, in general, is seen as a crucial market for expansion outside China. In Europe, CATL is already present in Germany (8 GWh/year) and in the near future will add a massive 100 GWh plant in Hungary.
The IRA's requirements are very important for EV manufacturers because if they do not comply (US-made batteries), then their electric vehicles will not be eligible for the $7,500 federal tax credit, which severely impacts competitiveness and profitability.