EXCLUSIVE Tesla in talks with Chinese EVE for low-cost battery supply deal – Sources

Tesla Inc (TSLA.O) is in talks with Chinese battery maker EVE Energy Co (300014.SZ) to add the company to its supply chain from the Shanghai plant, four people familiar with the matter said. , while he sought to stimulate purchases of lower cost batteries.

EVE manufactures lithium iron phosphate (LFP) batteries, which are cheaper to produce because they use iron instead of the more expensive nickel and cobalt.

But LFP batteries generally offer shorter run times on a single charge than the more popular nickel / cobalt alternative.

EVE would become Tesla’s second LFP battery supplier after Chinese company Contemporary Amperex Technology Co (300750.SZ) (CATL).

Talks are advanced and the Palo Alto, Calif., Based company is looking to finalize the partnership in the third quarter, two of the people said.

EVE, a listed company in Shenzhen, is performing final testing of its products for Tesla, one person said.

Shares of the Chinese battery company jumped more than 10% in afternoon trading on Friday following Reuters’ report of the talks.

All sources declined to be identified as the discussions are private. Tesla and EVE did not respond to Reuters requests for comment.

Tesla CEO Elon Musk said this year the company was switching from standard range cars to an iron cathode over concerns over nickel supply to boost battery production.

The talks come as Tesla faces increasing competition from Chinese rivals such as Nio (NIO.N) and Li Auto, as well as increasing cost pressure.

Tesla raised the starting price of a standard-range Model 3 sedan in China from 1,000 yuan ($ 155) on Saturday to 250,900 yuan, citing cost fluctuations.

Data showed this week that factory gate prices in China rose to their fastest in three and a half years in April as the world’s second-largest economy gains momentum. Read more

Tesla also faces increasing regulatory pressure in China after consumer disputes over product safety and the scrutiny of how it handles data. Read more

The company uses batteries from the Chinese company Contemporary Amperex Technology Co (300750.SZ) (CATL) and the South Korean company LG Chem (051910.KS) for its Model 3 and Model Y cars made in China.

CATL has been the sole supplier of LFP batteries for Model 3 cars made in China with standard range since the end of last year.

Three of the sources said Tesla is working closely with EVE to get its batteries to meet its requirements, as it aims to bring in the supplier as what one of the sources called a “check and balance” against CATL. .

One of the sources said Tesla may start using EVE’s LFP batteries in China-made Model 3 and Model Y vehicles over the next six months and that EVE has ramped up production in order to prepare. to a possible partnership.

EVE, which supplies batteries to Chinese electric vehicle maker Xpeng Inc (XPEV.N), said in March that it also has battery supply partnerships with BMW (BMWG.DE) and Daimler AG (DAIGn.DE) .

($ 1 = 6.4505 Chinese yuan)

Our standards: Thomson Reuters Trust Principles.

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