Tesla to bring LFP battery supply chain to US

(Reuters) -Tesla is expanding its battery facility in Sparks, Nevada to bring the supply chain for cheaper lithium iron phosphate batteries (LFP) to the United States, Bloomberg News reported on Wednesday.

The electric automaker will buy idle equipment to make batteries from its Chinese supplier Contemporary Amperex Technology Limited (CATL) (SZ:), the post said, adding that the plant will have an initial capacity of about 10 gigawatt hours.

Tesla (NASDAQ:), Nevada Economic Development Bureau and CATL did not immediately respond to Reuters requests for comment.

The move comes as regulation in the United States curtails companies from depending on countries such as China to source materials used in batteries such as nickel, cobalt and lithium.

This year, Tesla’s cheapest cars, the Model 3 compact sedan, lost tax credits for the purchase of EVs under the Inflation Reduction Act, as new regulations on sourcing of battery materials kicked in.

China currently houses the largest manufacturers of LFP batteries, including BYD (SZ:) and CATL, which supply Tesla.

Panasonic (OTC:) partnered with Tesla on Gigafactory in Nevada with investments in the production equipment, which the Japanese supplier uses to manufacture and supply the EV maker with cells.