Tesla Inc (TSLA:NASDAQ GS) is in talks with Chinese battery maker Eve Energy Co. Ltd. (300014.SZ) to add it to the supply chain of its Shanghai plant, in an effort to increase its purchase of low-cost batteries, four people familiar with the matter said.

Eve Energy makes lithium iron phosphate (LFP) batteries, which are cheaper to produce because they use iron rather than more expensive nickel and cobalt. And LFP batteries usually offer a shorter range on a single charge than the more popular nickel-cobalt ones.

Two people familiar with the matter said talks are well advanced and the two companies are looking to finalize the partnership in the third quarter. Eve Energy is now doing some final-stage tests for Tesla's products, one of the people familiar with the matter said.

If talks are successful, Eve Energy will become Tesla's second LFP battery supplier after China's Contemporary Amperex Technology Co. Ltd. (300750.SZ).

Tesla and Eve Energy did not respond to requests for comment.

Source: https://www.reuters.com/business/autos-transportation/exclusive-tesla-talks-with-chinas-eve-low-cost-battery-supply-deal-sources-2021-05-14/