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Tesla is at an advanced stage of talks with South Korea’s LG Chem to use batteries other than Panasonic’s for the electric vehicles it would be manufacturing at its Chinese factory in Shanghai, a source familiar with the discussions told Reuters on Friday.
Earlier on Friday, Bloomberg reported—citing people familiar with the issue—that the U.S. electric vehicle maker had agreed to buy batteries from the South Korean firm. Initially, Tesla plans to use LG Chem’s batteries for the Model 3s that it will be making at the Shanghai factory, Bloomberg reported.
The talks for battery supply with LG Chem are seen as a move toward diversifying its suppliers as Panasonic is currently its exclusive battery cells supplier.
As early as in November last year, Elon Musk said that Tesla would likely source battery cells from several suppliers for its Chinese production.
Replying to a question on Twitter if Panasonic would be the battery partner for the Shanghai Gigafactory, Musk said on November 2, 2018:
“Tesla will manufacture all battery modules & packs at China Giga, as we do today in California & Nevada. Cell production will be sourced locally, most likely from several companies (incl Pana), in order to meet demand in a timely manner.”
In January this year, Musk joined the mayor of Shanghai for the groundbreaking ceremony of Tesla’s first factory outside the U.S. and in the world’s largest EV market, China.
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Tesla aims to finish the initial construction of the Shanghai Gigafactory this summer, begin production of Model 3 by the end of this year, and reach high volume production next year, Musk wrote on Twitter on the day of the event in January.
Last month, Morgan Stanley said that Tesla could open its Chinese factory sooner than forecast, adding that it expects the U.S. electric vehicle maker to become “the leading luxury EV player in China.”
Tesla has started the construction of a production facility in the world’s top EV market in order to be able to compete on a level playing field with a growing number of local EV manufacturers. As a U.S.-made vehicle, Tesla’s cars in China have been subject to steep tariffs, and sales have suffered in recent months due to the U.S.-China trade war.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.