Tesla Inc. is in talks with Chinese battery maker EVE Energy Co. to add the firm to its Shanghai factory supply chain, four people familiar with the matter said, as it seeks to boost procurement of lower cost batteries. EVE makes lithium iron phosphate (LFP) batteries, which are cheaper to produce because they use iron instead of more expensive nickel and cobalt, Reuters reports.
But LFP batteries generally offer a shorter range on a single charge than the more popular nickel/cobalt alternative.
EVE would become the second supplier of LFP batteries to Tesla after China’s Contemporary Amperex Technology Co (CATL).
The talks are advanced and the Palo Alto, California-based company is seeking to finalise the partnership in the third quarter, said two of the people.
Shenzhen-listed EVE is running some final-stage tests of its products for Tesla, said one person.
Shares of the Chinese battery firm jumped more than 10% in afternoon trade on Friday following the Reuters report about the talks.
Tesla CEO Elon Musk said this year the company was shifting standard range cars to an iron cathode due to concerns about the supply of nickel for scaling up battery production.
The talks come as Tesla faces growing competition from Chinese rivals such as Nio and Li Auto, as well as mounting cost pressure.
Tesla raised the starting price of a standard range Model 3 sedan in China by 1,000 yuan ($155) on Saturday to 250,900 yuan, citing cost fluctuations.
Data showed this week that China’s factory gate prices rose at their fastest in three and a half years in April as the world’s second-largest economy gathers momentum.