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It's Electric! Tesla Charging to Billions

It's Electric and Tesla is in. The Biden administration’s credits sets out to target EV battery production and Elon Musk says “Long term we expect the value of these credits to be very significant."

The credits, a key part of the Biden administration’s Inflation Reduction Act, are designed to encourage the manufacturing of certain energy components within the United States, such as solar, wind, and qualifying batteries.

For companies who manufacture battery cells, the credit is with $35 per kilowatt-hour (kWh).

There are however conditions placed on where the materials are sourced from. For example battery minerals must be sourced from countries with whom US has a free trade agreement, such as Australia.

When asked how much does Tesla expects to earn in the coming year from the credits, Musk told the company’s Q4 earnings call on Thursday (Australia time) said: “Long term we expect the value of these credits to be very significant. You can do the math, if we were to get anywhere near 1000 gigawatt hours of production or even a few hundred gigawatt hours it’s very significant.”

Most of Tesla’s batteries are currently produced in the US by Panasonic. However, Tesla is ramping production of its own 4680 cells this year which means Tesla’s own in-house battery production will be significantly higher in 2024.

“In the case of Panasonic with its domestic manufacturing (US) we’re splitting the value of the credit. So the value the credits this year will will not be gigantic but I think it could be gigantic and we think it probably will be very significant in the future.”

Tesla CFO Zach Kirkhorn added: “We think on the order of $US150 to $US250 million per quarter this year, and growing over the course of the year so far as our volumes grow”.

Doing the math, if Tesla manufactured 60kWh battery packs for 1 million vehicles in the US, the credits would be worth $US2.1 billion.

Although the majority of Tesla’s production is currently coming from its Shanghai factory in China, Tesla is aiming to produce 1.8 million vehicles worldwide this year so it’s likely it will be earning billions of dollars a year from the credits in the near future.

A day before the earnings call, Tesla announced a $US3.5 billion investment into its existing Nevada factory to scale 4680 battery production and to build out production lines for the Tesla Semi truck.

Tesla said that the expansion would give the Nevada factory an annual battery production capacity of 100 gigawatt hours per year but that this would be expanded to 500 gigawatt hours in future.

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