Tesla to approve first new battery supplier for vehicles since Panasonic, report says

Ever since Tesla’s inception, Panasonic has been the automaker’s only approved battery supplier when it comes to its electric vehicles.

Now Tesla is reportedly looking to approve its second one in order to supply battery cells to Gigafactory 3 in China.

According to sources talking to Reuters, Tesla and Lishen, a Chinese battery manufacturer better known for supplying the consumer electronics industry, have already signed an agreement:

“Tesla has signed a preliminary agreement with China’s Tianjin Lishen to supply batteries for its new Shanghai car factory, as it aims to cut its reliance on Japan’s Panasonic, two sources with direct knowledge of the matter said.”

They reportedly haven’t settled on the volume that Tesla will need at Gigafactory 3.

Update: Tesla confirmed that they had talks with Lishen, but they denied Reuters’ report that anything is signed:

“This is completely false. Tesla previously received quotes from Lishen, but did not proceed further. We have not signed any agreement of any kind with them.”

Lishen has a battery factory where they are manufacturing 2170 cells, the same format used in Model 3, just 60 miles away from Tesla’s upcoming Shanghai factory.

Over the last few years, Tesla started using battery cells from Samsung SDI and LG Chem for its stationary energy storage products, but Panasonic always had the exclusive contract to supply the automakers with battery cells for its electric vehicles.

Panasonic made cells in Japan and exported them to California for Tesla’s Model S and Model X programs, while the two companies partnered to make the cells for Model 3 at Gigfactory 1 in Nevada.

But CEO Elon Musk has been hinting at Tesla looking at other suppliers for Gigafactory 3:

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.

— Elon Musk (@elonmusk) November 2, 2018

At first, Musk said that all new Tesla factory will include the production of both battery cells and full vehicles, but it appears that the company had to change its plans when it came to Gigafactory 3 in China.

Due to the uncertainty that came with the trade war between China and Trump’s administration, Tesla decided to accelerate its plan to establish manufacturing capacity in China in order to avoid increasing tariff on US vehicles.

Tesla officially broke ground at Gigafactory 3 in Shanghai earlier this month.

Musk expects that the actual Gigafactory 3 building could be ready this summer and they would start production of “some parts of Model 3 production” by the end of 2019.

Electrek’s Take

This is an interesting development.

It could be in order to get battery cells sooner to enable production to start at Gigafactory 3 this year, but I also wouldn’t be surprised if Tesla would want to start becoming less reliant on Panasonic.

The relation has been mutually beneficial as Tesla became the largest consumer of battery cells in the world and Panasonic a premier supplier in the automotive industry.

But as any good supply chain manager would tell you, it’s never a good idea to rely on a single supplier.

Also, it’s interesting that this news comes just as Panasonic and Toyota are supposedly about the announce an important partnership for batteries in China.

What do you think? Let us know in the comment section below.