On February 3, Chinese manufacturer of batteries CATL announced that it had signed a two-year supply agreement with Tesla, valid from July 1, 2020 to June 30, 2022. CATL said the electric car maker, led by Elon Musk, will determine the volume of battery purchases based on its needs, but the agreement does not impose restrictions on Tesla's volume of purchases.
Tesla said last week it had partnered with South Korean LG Chem and China's CATL to supply batteries used in electric vehicles. The company, which has a long-standing battery supply agreement with the Japanese company Panasonic, said its contract with LG Chem and CATL was smaller.
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This partnership is a big blow for the Japanese battery manufacturer Panasonic, which until now was the only supplier for all Tesla batteries, but clearly could not satisfy all the needs of the automaker.
Tesla made rapid progress at its Chinese plant in Shanghai, from which it began delivering cars at the end of December 2019. Model Y will also be released ahead of schedule. Therefore, the company will need more batteries.
Panasonic refused to produce batteries for Tesla in China. Kazuhiro Tsuga said in November that the automaker would either have to use batteries manufactured by Panasonic at a Nevada plant or find another local supplier.
This agreement paves the way for mutually beneficial cooperation for Tesla and CATL. Gigafactory 3 in China, worth $2 billion, began delivering cars just 357 days after the start of construction, which is a record for global automakers in China. The factory will begin with the production of 150,000 Model 3 sedans. Later, Tesla plans to increase production to 250,000 cars per year.
The factory in China was the first Tesla factory outside the United States. It is part of the company's plan to strengthen its presence in the world's largest automotive market, which should also help minimize the impact of the US-China trade war.
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Featured image: Tesmanian