Tesla secures battery material supply deals with two big Chinese companies

Tesla has secured battery material supply deals with two large Chinese companies, according to new fillings. The move aims to ensure battery supply to support its electric vehicle production through the mid-decade.

Automakers who are serious about electric vehicles are currently scrambling to secure as much long-term battery supply as possible since it will determine how many electric vehicles they are going to be able to produce.

With internal combustion engine sales declining, their capacity to produce EVs will soon represent their entire production capacity and their only capacity for growth.

Ford and GM both recently announced plans to secure critical minerals and battery supply to support the production of 600,000 and 1 million electric vehicles by 2025.

As for Tesla, it only sells electric vehicles, and as such, the company has been securing long-term battery supply for decades now, but it is able to do it more efficiently as of late due to its scale.

The automaker is looking to exit 2022 with a production rate of about 2 million electric vehicles a year – twice what its American competitors are hoping to hit in three years.

From there, Tesla aims to grow at a rate of about 50% per year, and that will require massive amount of battery materials.

Today, we learn that Tesla has secured battery precursor materials through new contracts with Zhejiang Huayou Cobalt Co. and CNGR Advanced Material Co in China (Bloomberg first reported):

Zhejiang Huayou Cobalt Co. and CNGR Advanced Material Co. signed pricing agreements with the electric-vehicle giant for supplies until the middle of this decade, according to separate stock-exchange statements from the companies. The deals are for ternary precursor materials — chemical cocktails that are key to storing energy in lithium-ion batteries.

Huayou Cobalt will supply processed cobalt for batteries to Tesla from July 1, 2022, to the end of 2025, according to the filing. The miner specified that the prices of the products will be “subject to market prices for nickel, cobalt and manganese, as well as refining fees.”

CNGR will supply Tesla between 2023 and 2025 based on the new contract – though both companies had previously been supplying the American EV automaker.

These new contracts for Tesla follow several more throughout the entire battery supply chain.

In January, Tesla signed a deal to secure nickel from a new mine in the US. Tesla ended up adding another deal with an upcoming lithium mine in Australia developed by Liontown in February.

A month later, Tesla added another lithium contract with a new mine in Australia.