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The POTCAR file contains the pseudopotential for each atomic species used in the calculation. If the number of species is larger than one simply concats the POTCAR files of the species. On a UNIX machine you might type the line
cat ~/pot/Al/POTCAR ~/pot/C/POTCAR ~/pot/H/POTCAR >POTCAR
to concat three POTCAR files. The first file will correspond to the first species on the POSCAR and INCAR file and so on. Starting from version VASP 3.2, the POTCAR file also contains information about the atoms (i.e. there mass, their valence, the energy of the reference configuration for which the pseudopotential was created etc.). With these new POTCAR file it is not necessary to specify valence and mass in the INCAR file. If tags for the mass and valence exist in the INCAR file they are checked against the parameters found on the POTCAR file and error messages are printed. Mind: Be very careful with the concatenation of the POTCAR files, it is a frequent error to give the wrong ordering in the POTCAR file!
The new POTCAR files also contains a default energy cutoff (ENMAX and ENMIN line), therefore it is no longer necessary to specify ENCUT in the INCAR file. Of course the value in the INCAR file overwrites the default in the POTCAR file. For POTCAR files with more than one species the maximum cutoffs (ENMAX or ENMIN) are used for the calculation. For more information about the supplied pseudopotentials please refer to Pseudopotentials.