Batteries:
Tesla Inc. agreed to buy batteries from South Korea’s LG Chem Ltd. to be used in electric vehicles produced out in China, according to people familiar with the matter.
Batteries made by LG Chem will be used initially in Model 3 cars manufactured in the plant near Shanghai, Tesla’s first outside of the U.S, said the people, asking not to be identified discussing a private matter. LG Chem batteries will also be used in Model Ys produced there once the compact crossover car is released, they said. Shares of LG Chem jumped.
The supply agreement isn’t exclusive to LG Chem, the people said, meaning Tesla could procure batteries from other suppliers as the Model 3 maker prepares to start production in China later this year, part of the EV pioneer’s push into what is the world’s biggest market for new-energy vehicles.
Tesla plans to use multiple battery suppliers for its China-made cars, the people said, and has also been in talks with top Chinese battery producer Contemporary Amperex Technology Co. Ltd. about a supply deal, Bloomberg reported in March. Tesla has a long-standing relationship with Japan’s Panasonic Corp., which makes batteries with the carmaker in Nevada.
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LG Chem will provide Tesla with so-called 21700 type battery cells, which have more capacity than some older battery types, one of the people said. They will be made at LG Chem’s factory in Nanjing, which is about 200 miles (320 kilometers) west of Shanghai.
A unit of South Korea’s fourth-largest conglomerate, LG Chem is the world’s second-biggest manufacturer of lithium-ion battery cells, according to BloombergNEF. The company is seeking to reduce its reliance on chemical production by boosting sales of electric-vehicle batteries. It has supply deals with Volvo Cars to Renault SA and General Motors Co.