Tesla Inc. has reached a preliminary agreement with the Chinese company Tianjin Lishen to supply the batteries needed for the new Tesla factory in Shanghai. The move is part of a continuing effort by Tesla to lessen its dependence on the Panasonic battery it purchases from Japan.
The two companies have not yet agreed on the size of the initial battery order. Lishen is also not yet clear on the cell size of the battery Tesla will use.
Panasonic is the exclusive supplier of battery cells for Tesla at this time. But Tesla Chief Executive Officer Elon Musk announced in November his company would manufacture its packs and battery modules at its Shanghai factory for the foreseeable future. Musk also said the company was working to diversify its supplier source.
A Tweet from Musk in November informed the public that cell production will be sourced locally in the Shanghai area and will most likely include several companies.
Tesla began its operations at the $2 billion ‘Gigafactory’ in early January. The factory is the first for Tesla in China and the company hopes to produce its Model 3 vehicles at the factory by the end of 2019.
The Chinese auto market is the largest market for automobiles in the world. Musk explains his company intends to produce more affordable vehicles for the Chinese consumer. Tesla is searching for ways to overcome the complications of the ongoing trade tensions between the United States and China.
Panasonic issued a statement regarding the new operations plant Tesla now operates in Shanghai. Company officials said no decision has been made regarding the development. The company would not comment on the possibility of not being the exclusive supplier for Tesla any longer.
Lishen boasts of working relationships with Apple, Samsung Electronics, Hyundai Motors, and others. Lishen recently joined other major battery makers who are pursuing contracts in the electric vehicle industry. The company began manufacturing a battery identical to the one Panasonic makes for Tesla’s model three two years ago.
Panasonic recently joined forces with Toyota Motor Corp and the two entities plan to begin producing electric vehicle batteries together sometime next year. The move is part of an effort to compete with Chinese companies.
The move will help Panasonic become less dependent on the business it receives from Tesla. Panasonic has struggled financially in the past due to the many production delays experienced by Tesla.