Tesla aims to ditch CATL (宁德时代)

Shift to U.S.-made cells for Megapack

It has been reported that Tesla is moving to source batteries for its Megapack 3 grid-scale storage systems from U.S.-based production — notably through a deepening tie-up with LG Energy Solution — rather than importing cells from CATL (宁德时代). The move is framed less as a technology choice than a supply‑chain and policy play: locally made prismatic lithium‑iron‑phosphate (LFP) cells can cut logistics costs, avoid potential import tariffs and tap lucrative U.S. subsidies under the Inflation Reduction Act.

Fact pattern and recent deals

Reportedly, LG Energy Solution paid roughly $2.08 billion to acquire General Motors’ Lansing battery plant and has been preparing that and other U.S. facilities to supply Tesla’s Houston Megafactory. The Biden/Trump administration’s review of dozens of industrial transactions reportedly cleared a roughly $4.3 billion battery production agreement between LG and Tesla; the U.S. Department of the Interior said domestically made cells would power Megapack 3 units assembled in Texas. It has been reported that General Motors will still take cells from Lansing while remaining capacity will shift to LFP cells aimed at Tesla’s storage business.

Why LFP for storage — technical and economic drivers

Storage needs differ from passenger EVs. LFP chemistry trades peak energy density for much higher safety and cycle life: thermal runaway thresholds are higher and cells can endure many more daily cycles, making them better suited for grid deployments. Reportedly LFP production costs are cited at roughly $98/kWh versus $112–120/kWh for high‑nickel cathodes, and Section 45X tax credits in the U.S. can stack as much as $35/kWh at the cell level plus $10/kWh at the module level, with additional incentives tied to critical‑mineral sourcing — direct payments that massively change project economics.

Geopolitics and the wider industry pivot

Why now? U.S. demand for passenger EVs has softened, prompting automakers and battery makers to pivot toward stationary storage and AI data‑center demand, which require huge, resilient buffer capacity. The policy context matters: Washington’s industrial incentives are explicitly designed to onshore battery production and reduce strategic dependence on Asia. Will Tesla abandon CATL entirely? Not immediately — but the company’s push to localize Megapack batteries signals a broader re‑alignment in which industrial policy, tariffs risk and logistics can outweigh longstanding supplier relationships.