Contemporary Amperex Technology Company (CATL) will begin supplying lithium-ion batteries to Tesla starting in January 2022, the Global Times has reported. The contract between the two ensures that CATL will supply Tesla with lithium-ion batteries through the end of 2025.
CATL announced that it signed a Production Pricing Agreement with Tesla on Friday in order to further extend and deepen the friendly and cooperative relationship with Tesla. The new agreement is a continuation of the one signed by both companies in February 2020. In that contract, CATL agreed to supply lithium-ion batteries to Tesla from July 2020 through June 2022.
“The signing of the agreement represents Tesla’s further recognition of the product quality and production capacity of the company’s batteries, which is conducive to strengthening the long-term and stable cooperative relationship between the company and Tesla, and in line with the interests of the company and its shareholders,” CATL stated.
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CATL added that it expects the extended agreement with Tesla will positively impact its business performance. The newly extended deal also hints at Tesla’s long-term intentions for China. Tesla continues to ramp up production at Gigafactory Shanghai, which will someday launch a more affordable ~$25,000 Tesla, but a core element in that goal is having low-cost batteries. A trusted battery supplier that can offer cheap but high-quality batteries is critical to the plan. Might that be CATL?
Automotive News Europe noted last year that CATL’s Zeng Yugun was pretty close to Tesla’s CEO, Elon Musk. In an interview, Zeng explained that he and Elon often discuss prospective innovations in technologies and touched upon Tesla’s goal of making its vehicles more affordable.
“Elon talks about cost all day long, and I told him to be assured that I would have solutions,” Zeng said. “We get along well. He’s a fun guy.”
The article noted that aligning with Tesla would boost CATL’s domestic sales. “CATL’s success is largely because of the strong demand in China,” BloombergNEF analyst Daixin Li said. “In the future, as EV markets outside China are growing quickly, maintaining and even increasing market share in the global market will rely on how successfully it can secure demand outside China.”
Although that was written almost a year ago, it’s great to look back at the progress between Tesla and CATL and note that the foundation of their partnership is not only strong but can be felt in the continued extension that CATL just announced.