Elon Musk in China with Le Keqiang

Tesla is in talks with a Chinese battery maker to supply the cars it will manufacture at its soon-to-be-built Shanghai factory.
Qualifying a complex new part and ensuring that it matches the quality of Tesla’s originally sourced materials will take time and resources, according to an industry expert.

Tesla is in talks with Chinese battery maker CATL (Contemporary Amerpex Technology Co Limited) about supplying its currently-under-construction Shanghai plant with battery cells, according to Bloomberg.

CATL is part of China’s dream of building technology companies that rival those of the US, EU, and Japan. It is a national champion with international ambitions. And that is why, to play in China, Tesla has to source its cells from CATL.

This could complicate matters for Tesla, which has been adamant that it will be manufacturing cars in Shanghai by the end of the year. The company uses Panasonic battery cells for the rest of its cars around the world, and partners with the Japanese battery maker for its massive Gigafactory plant in Nevada — a plant CATL hopes to one day surpass in terms of capacity.

“While China may indeed have a material impact on near term volume expectations, we still recommend investors to keep medium/long-term expectations for Tesla’s ability to run a profitable Chinese business very low, due to a variety of technological and legal/regulatory factors,” Morgan Stanley analyst Adam Jonas wrote in a note to clients on Tuesday.

This supply chain restructring is one of those reasons.

Read more: 2019 was supposed to be easy for Tesla, now it’s a circus

There is a process for this stuff

In order to successfully integrate CATL batteries into Tesla cars — specifically, the Model 3s that will be made in Shanghai — Tesla will have to do a lot of work behind the scenes to make sure they perform as well as the Panasonic batteries.

“So this is a big wildcard since now since Tesla has to qualify another battery manufacturer,” Tu Le, founder of consultancy China Auto Insights, told Business Insider

He said that if Tesla doesn’t ensure that CATL’s batteries work exactly like Panasonic’s customers will figure it out and opt for the one that works better. Without studying Tesla’s qualification process and based solely on his experience, he estimated that integrating CATL’s battery could take 12-18 months “depending on the quality level of the battery and the compatibility with Tesla’s current systems.”

“I don’t think they would’ve made …read more

Source:: Business Insider

      

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We just got a little taste of how complicated things could get for Tesla in China

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