China’s CATL reaches massive battery deal with Tesla, while Panasonic bails on stock

China’s largest battery maker CATL (Chinese Amperex Technology Co., Limited) has extended its battery supply deal with Tesla until 2025.

A separate report has also revealed that Panasonic – originally Tesla’s sole battery supplier – has sold all its stock held in the Californian EV maker, although it still remains one of its suppliers having locked in a supply agreement until 2030 last June.

In a stock exchange filing on Monday evening, CATL announced that the new agreement was reached last Friday and that under the extended agreement it would supply batteries for the next 4.5 years to the EV maker’s Shanghai gigafactory.

CATL’s previous agreement with Tesla, under which it supplies cobalt-free lithium-iron-phosphate cells that are less energy-dense than the NCA cells provided by Panasonic, but which can be regularly charged to 100%, went until 2022.

“The agreement signifies further acknowledgement by Tesla of the product quality and production capability of [our company], and will help strengthen the long-term cooperation relationship between the company and Tesla,” CATL said in the statement.

The battery sector, which is key to the transition to clean electric transport and energy storage, is proving to be very lucrative for the Chinese cell maker.

As South China Morning noted in January CATL saw returns increase four-fold in 2020, more than others in the Tesla supply chain, and making it the eighth largest company in China by market value.

Panasonic however has cashed in, selling all of its stock held in Tesla Nikkei Business Daily reports (via CNBC). Having bought 1.4 million shares in 2010 for $US21.15 each, it sold the entire holding at the end of 2020. The exact sale price has not been revealed but at the time, Tesla stock was valued at just under $US900.

It means that Panasonic’s 429.9 billion yen ($A5.15 billion) “proceeds from sale and redemption of investments” as stated in its cash flow statement for the fiscal year are likely attributed to the stock sale.

CATL says that the income from any additional battery cell sales as a result of its new agreement with Tesla will be counted in the relevant financial years.

The extension of its deal with Tesla comes just months after the battery maker said it would invest almost $A6 billion in building three more factories in order to expand its production capacity for both automotive and energy storage batteries, according to China Daily.

Tesla has been the subject of some criticism in the media after it voluntarily “recalled” some 285,000 Model 3 and Model Y vehicles made in both Shanghai and Fremont, although in actuality all that is required to fix the problem which would activate cruise control accidentally is an over-the-air software update.

Another report from The Information falsely claimed that demand for Tesla electric cars was down in China in May, although official figures later released by the China Passenger Car Association revealed that demand had actually increased by 200% from May 2020 to May 2021.

It is unlikely that demand for Tesla vehicles will be curtailed: its Model 3 already holds the title of most popular premium electric car in China and is second only in sales to the tiny Wuling Mini EV. Meanwhile, Model Y production in Shanghai is continuing to ramp up, with Fremont imports being shipped to keep up with demand in the meantime.