EVE denies battery supply deal with Tesla

SHANGHAI/HONG KONG -- EVE Energy Co., which makes lithium iron phosphate batteries, said a Reuters report that it’s in supply deal talks with Tesla Inc. is “unfounded.”

The company didn’t have any business communications with Tesla over the batteries, it said in a statement posted on the Shenzhen Stock Exchange website on Sunday, Bloomberg reported.

In the initial report, released Friday, Reuters said Tesla was in talks to add the Chinese battery maker to its Shanghai factory supply chain, citing four people familiar with the matter.

EVE makes lithium iron phosphate batteries, which are cheaper to produce because they use iron instead of more expensive nickel and cobalt. But LFP batteries generally offer a shorter range on a single charge than the more popular nickel/cobalt alternative.

EVE would become the second supplier of LFP batteries to Tesla after China's Contemporary Amperex Technology Co., or CATL, Reuters reported.

Reuters reported the talks were in an advanced stage and the Palo Alto, California-based automaker was seeking to finalize the partnership in the third quarter, citing two of the people.

Shares of the Chinese battery firm jumped more than 10 percent in afternoon trade on Friday following the Reuters report about the talks.

All sources in the Reuters article declined to be identified, citing private discussions. Tesla and EVE did not reply to Reuters requests for comment.

Tesla CEO Elon Musk said this year the company was shifting standard-range cars to an iron cathode battery due to concerns about the supply of nickel for scaling up battery production.

The talks come as Tesla faces growing competition from Chinese rivals such as Nio and Li Auto, as well as mounting cost pressure.

Tesla raised the starting price of a standard-range Model 3 sedan in China by 1,000 yuan ($155) on May 8 to 250,900 yuan, citing cost fluctuations.

Data showed this week that China's factory gate prices rose at their fastest pace in three and a half years in April as the world's second-largest economy gathers momentum.

Tesla also faces mounting regulatory pressure in China after consumer disputes over product safety and scrutiny over how it handles data.

The company is using batteries from CATL and South Korea's LG Chem for its China-made Model 3 and Model Y cars.

CATL has been the sole supplier of the LFP batteries for China-made Model 3 cars with standard driving ranges since late last year.

EVE, which supplies batteries to Chinese EV maker Xpeng Inc., said in March it also has battery supply partnerships with BMW and Daimler AG.

Bloomberg and Reuters contributed to this report.