Tesla intends to return batteries to U.S. manufacturing

People familiar with the matter said that Tesla Inc. suspended plans to produce battery cells in Germany, as the company is considering eligibility for the U.S. electric vehicle and battery manufacturing tax credit. Tesla has been working to produce its own batteries and has discussed sending cell-making equipment to the U.S. planned for its Berlin plant, according to people familiar with the matter. Making more batteries in the U.S. could help Tesla get additional tax breaks under the Inflation Reduction Act (IRA). U.S. President Joe Biden signed the bill into law last month.

Analysts say the production tax credit provided by the Inflation Reduction Act could offset more than a third of the cost of electric vehicle battery packs as long as the rechargeable cells are manufactured and packaged in the U.S. The law also extends a $7,500 tax credit to buyers for certain electric vehicles whose batteries meet a number of purchase criteria.

Tesla’s move reflects how new U.S. laws are reshaping the electric vehicle industry, accelerating competition to supply batteries and related materials domestically. Tesla has yet to comment. In the days after the bill became law, Tesla told Texas officials that it was looking at regional sites to build a lithium-refining plant. Lithium, a key battery raw material, is currently mainly processed in China.

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