Tesla has signed a new long-term battery cell agreement with CATL, China’s biggest battery manufacturer, amid the race to secure a large battery supply in the auto industry.

The electric vehicle revolution is in need of an insane amount of batteries in order to keep growing at a high pace.

New production capacity is being snapped up by automakers as soon as it is being made available — often before new battery factories are even built.

For the longest time, Tesla had only approved Panasonic as a cell supplier for its electric vehicles.

It was able to convince the Japanese automaker to use its cylindrical Li-ion battery cells, previously mainly used in laptops, in electric cars.

Now, it has become standard, and automakers are fighting for Li-ion battery supply.

With the start of production at Gigafactory Shanghai, Tesla started approving other suppliers, namely LG Chem (now LG Energy Solution) and CATL.

CATL has rapdily grown into the largest battery cell manufacturer in China.

It started with electric buses, but its battery cells are now commonly used in many EVs produced in China, and the company is building new battery factories around the world to support EV production in other markets.

Now, CATL has announced that it has signed a new “Production Pricing Agreement” that will secure battery cell supply between January 2022 and December 2025.

The company wrote in a press release:

“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.”

It builds on the previous agreement between Tesla and CATL signed in February 2020. It was supposed to last until June 2022.

Tesla’s partnership with CATL has already been really useful for the automaker to ramp up production at Gigafactory Shanghai by starting Model 3 production with lithium iron battery cells.

There’s no word on what battery chemistry this new supply agreement covers.

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