Tesla Inc. is in talks about ordering rechargeable batteries from top Chinese producer Contemporary Amperex Technology Co. Ltd. to power Model 3 cars the U.S. electric automaker plans to start assembling at its new factory near Shanghai, people familiar with the matter said.
CATL has been discussing the required specifications for the batteries with Tesla officials, the people said, asking not to be named because the talks are private. Still, there's no guarantee that an agreement will be reached, according to the people.
Securing a supply of batteries in China, the world's biggest car market, will be key to Tesla's financial success as it prepares to open its first plant outside of the U.S. For CATL, winning orders from a high-profile customer like Tesla would bolster its profile as one of the world's emerging battery-making power houses. Based in China's southern Fujian province, the company is on course to become the biggest manufacturer of lithium ion batteries in China.
Tesla declined to comment. The carmaker, which has a battery-supply relationship with Panasonic Corp., said in its latest annual report that it has one "fully qualified" vendor and it's working to add more.
CATL didn't respond to a request for comment.
Tesla is doubling down on China at an uncertain time for the company, the country and the global auto market. While it's cutting jobs elsewhere and shutting down stores, the electric-vehicle pioneer is building a major facility near Shanghai. Still under construction, the plant comes amid China's worst car sales slump in a generation, and with local Chinese rivals from BYD Co. to Nio Inc. already selling EVs into the market.
Tesla is relying on China to help realize its vision on the ground. The carmaker secured as much as $521 million in loans from Chinese banks to build the factory, and has opened the door to further funding by amending a separate asset-backed credit agreement, increasing how much it can borrow by as much as $700 million.
After years of negotiations with Chinese authorities to become the first foreign automaker to wholly own a manufacturing facility in the country, Tesla broke ground on the outskirts of Shanghai on Jan. 7. Musk has said the company plans to start battery and Model 3 production at the factory by the end of the year.