Tesla Strikes Battery Material Supply Deals With 2 Chinese Firms At A Crucial Time

Tesla, Inc. (NASDAQ: TSLA) has agreed on separate deals to source battery raw materials from two Chinese companies, Bloomberg reported, citing stock exchange filings by these companies.

What Happened: The electric vehicle maker has signed pricing agreements with Zhejiang Huayou Cobalt Company and CNGR Advanced Material Company for supplying ternary material for lithium-ion batteries.

Related Link: Elon Musk Says Time to Move On From This Category Of Cars, Here's Why

The supply deal with Zhejiang Huayou will run from July 2022 to December 2025, while CNGR's contract term will start in January 2023 and run through December 2025. The former said the price of the ternary precursor will be determined based on the market price and processing fee applicable at the time of purchase.

Why It’s Important: Batteries account for the bulk of the cost of EV batteries. The Ukraine war led to an escalation in costs of battery raw materials earlier this year, and this, in turn, prompted EV makers to raise vehicle prices. Moreover, there is supply scarcity for these raw materials.

Ford Motor Company (NYSE: F) announced earlier this month it has secured deals for direct sourcing of battery raw materials in the U.S., Australia, Indonesia, and other countries. Peer General Motor Corporation (NYSE: GM) said last week that it has negotiated three binding supply agreements for the supply of battery raw materials.

Tesla has a long-term target of 50% growth in deliveries, and these deals will likely help the company to hit the goal.

Price Action: Tesla shares closed Friday’s session 5.78% higher at $891.45, according to Benzinga Pro data