Windfall benefits for Tesla as IRA kicks in

The US Inflation Reduction Act has provoked a flurry of approval and disapproval — one commentator said it was both the worst and the best piece of US legislation on batteries — but the full financial impact on US car makers is only still becoming clear.

Bob Galyen, the former CTO of CATL and also acknowledged as one of a small coterie of international lithium battery experts said on June 29 that the IRA was going to provide huge benefits for US auto-manufacturers and battery makers.

Speaking to Batteries International after addressing an audience at the Battery Cells & System Expo in Birmingham, UK, Galyen painted a bright picture for the industry.

“If you look at research from Benchmark Mineral Intelligence you’ll see that Tesla and its battery partner could receive $41 billion in government tax credits by the end of 2032 — that’s far more than its key Detroit rivals,” he said.

There two credits available (but you could only apply for one of the two) — the Advanced Energy Project Credit and the Advanced Manufacturing Product Credit. The AMPC is where the market interest is.

The rewards from the production credits that are part of the IRA are based on volumes of business so the more batteries and EVs a company makes in the US (or in countries included in the Treasury regulations), the more money it gets via tax credits. Tesla, which had started battery production in 2013 at its first gigafactory has put Tesla and Panasonic far ahead of their competition.

“It’s first mover advantage,” says one analyst. “So those ahead of the game will stay ahead of it until 2030 when the credits taper off. Another reckoned that Tesla would use the investment credits to cut the price of its cars. Already Tesla sells more of its EVs than the rest of the competitors in the sector combined.

Galyen’s talk also provided a fascinating insight as to the areas in lithium battery technologies which he regarded as being both cutting edge and soon to be mainstream. He was particularly enthusiastic about Titan AES which uses ultrasound technology for quality inspection and homogenous product manufacturing.

The next step forward in lithium battery recycling will come from Chromatopgraphic separation which Galyen says is a leap ahead from solvent extraction.

Goldman Sachs says the credits baked into the IRA could total $1.2 trillion, which is three times more than the government estimated at the time the IRA was passed. That could lead to political pushback if reactionaries regain control of the US government in the future. “It’s a real risk. People are not giving it 100% likelihood to survive,” said Mark Wakefield, head of the automotive practice at AlixPartners.