Tesla signs preliminary battery sourcing agreement with China’s Tianjin Lishen

Tesla is placing its supply chain in order as it gears up for production at its Shanghai Gigafactory.

According to two sources with direct knowledge of the matter at hand, Tesla Inc has signed a preliminary agreement with Tianjin Lishen for supplying batteries for its Shanghai Gigafactory, as it plans to expand its battery sourcing options beyond Panasonic.

As per one of the sources, the companies are yet to reach a decision on the quantum of the order Tesla would place; Lishen has also to work out on the size of the battery cell that Tesla would require.

“Cell production will be sourced locally, most likely from several companies (incl Pana), in order to meet demand in a timely manner,” Musk had tweeted in November.

Other battery makers in the running for Tesla’s contracts include LG Chem Ltd, Contemporary and Amperex Technology Co Ltd.

Tesla declined to comment.

Lishen did not immediately respond to requests for comment.

In a statement, Panasonic said it was studying various options with regards to Tesla’s Shanghai Gigafactory.

Sources preferred the cover of anonymity since the discussions are private.

China’s Lishen, whose clients range from Samsung Electronics and Apple to Hyundai Motor and Geely, is pursuing an aggressive expansion strategy in the rapidly growing EV industry.

Lishen has started the mass production of the same type of cylindrical battery that Panasonic makes for Tesla’s Model 3 in 2017, in Suzhou, just 60 miles (100 kms) from Shanghai.

The development comes as Panasonic and Toyota Motor Corp are set to launch a joint venture in 2020 to produce EV batteries so as to better compete with Chinese rivals.

For Panasonic, its joint venture with Toyota will help it cuts its reliance on Tesla, whose production delays have weighed on its earnings.

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