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(Yicai Global) Jan. 23 -- Tesla has denied that it will use Chinese Lishen Battery Joint-Stock's products for its first cars that will be made in China, but it's options are few and far between.
Lishen is one of the only few companies in the country that mass-produces the exact types of battery storage units, the highly powerful 21700 cells, that Tesla needs, Chinese Caijing Magazine reported.
Hefei's Guoxuan High-Tech Power Energy, which makes cylindrical lithium-ion batteries, has said it does not plan to produce 21700-type cells. Shenzhen's BAK Battery and Far East First New Energy have started mass production of 21700s in the second half of last year.
Reuters reported yesterday that the Palo Alto-based carmaker penned a preliminary agreement with Lishen for the latter to supply batteries for its first overseas factory in Shanghai in order to diminish reliance on Japan's Panasonic. Tesla received Lishen's tender but did not proceed with a contract, it said to Caijing. An employee at the Tianjin-based bidder also said that no cooperation deal between the two parties was reached.
Batteries are one of the most crucial parts that determine the pricing of NEVs. Tesla needs to lower its prices if it want to expand in the Chinese market, Caijing's report said, adding that local suppliers are a premise of reducing costs. Tesla aims to churn out 500,000 cars in its China factory each year, while the firm sold only half of that globally last year.
Despite Tesla's three price decreases in China late last year, it will still have to fight for a larger footing in the biggest global NEV market that is also fiercely competitive. The prices of all its models were dropped up to 26 percent last November. Later, the price of Model 3 Long Range All-Wheel Drive was slashed by 7.6 percent to CNY499,000 (USD73,528).
It is also unlikely that the firm will make its own batteries from scratch in China. The new plant in Shanghai's Lingang New City area may only be capable of assembling battery packs and producing NEVs due to the city's strict environmental standards to curb pollution, Caijing reported, citing people familiar with the city's environmental policy.
It is wise to have multiple battery providers since market conditions like short supply and price hikes can trouble car firms, a manager of a large Chinese lithium battery maker said.
Editor: Emmi Laine