Tesla is in talks to add another supplier of cheaper LFP battery cells, EVE, for its electric cars produced in China, according to a new report.

Last year, Tesla CEO Elon Musk mentioned that he believes the energy density of iron phosphate (LFP) batteries has improved enough that it now makes sense to use the cheaper and cobalt-free batteries in its lower-end vehicles.

Furthermore, the CEO indicated that the use of LFP batteries also frees up more battery supply of lithium-ion chemistry cells using nickel cathode for Tesla’s other vehicle programs.

In October 2020, Tesla started producing the Model 3 Standard Range Plus out of Gigafactory Shanghai with LFP battery cells.

The move was significant because Tesla also started exporting this new version of the Model 3 outside of China for the first time.

This new made-in-China Model 3 Standard Range Plus with LFP batteries ended up becoming Tesla’s new base model in Europe and other markets.

Earlier this year, Musk also said that Tesla will be moving more vehicles to LFP batteries over nickel supply concerns.

Now Reuters reports that Tesla is in talks with EVE Energy, a battery cell manufacturer in China, to secure more LFB cells:

“Tesla Inc is in talks with Chinese battery maker EVE Energy Co to add the firm to its Shanghai factory supply chain, four people familiar with the matter said, as it seeks to boost procurement of lower cost batteries.”

Tesla currently gets its LFP battery cells from CATL, the world largest’s battery manufacturer.

EVE is currently in the final stages of validating the cells for use in Tesla vehicles, and they aim to be in production during the third quarter, according to the report.

The publication added:

“Three of the sources said Tesla has been working closely with EVE to get its batteries to meet its requirements, as it aims to bring in the supplier as, what one of the sources called a “check and balance” against CATL.”

Therefore, the partnership would help Tesla to have a better position in negotiations with CATL while also allowing them to secure more battery cell supply to accelerate production at Gigafactory Shanghai.

Tesla has recently also been moving into its own battery cell production with its new 4680 cell, but the automaker has indicated that its plans to produce its own cell would not slow down its need for cells from current manufacturers.

In fact, Musk said that Tesla would be buying every cell it can at the right price.

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