Chinese Battery Material Inventory Increases Due to Tesla Supply Agreement

Chinese battery material suppliers Zhejiang Huayou Cobalt Co Ltd (SS:603799) and CNGR Advanced Material Co Ltd (SZ:300919) gained Monday after striking supply deals with Tesla (NASDAQ:TSLA).

Chinese battery material providers Zhejiang Huayou Cobalt Co Ltd (SS:603799) and CNGR Advanced Material Co Ltd (SZ:300919) saw gains on Monday following the signing of separate supply deals with electric vehicle manufacturer Tesla (NASDAQ:TSLA).

After the announcements, the shares of Zhejiang Huayou increased by about 9 percent, while those of CNGR increased by more than 6 percent. While both companies are currently listed as official Tesla suppliers, the new agreement will boost their sales to the electric car manufacturer.

Tesla will be supplied by Zhejiang Huayou between 2022 and 2025, while CNGR will provide between 2023 and 2025. Tesla has a substantial presence in China, with Shanghai serving as a significant manufacturing base.

In China, the Tesla Model Y is also one of the most popular passenger automobiles. A spate of COVID-related lockdowns in the Shanghai facility prompted Elon Musk, the company’s chief executive officer, to push employees to work harder and make up for a difficult quarter.

Tesla’s new agreement with battery material suppliers coincides with an increase in the number of automakers transitioning to electric vehicles, which is likely to strain the availability of materials required to produce batteries.

Zhejiang Huayou obtains cobalt from locations in both Zhejiang and the Democratic Republic of the Congo. Apple Inc. is also mentioned as a cobalt supplier for the company (NASDAQ:AAPL).

In July, the company also secured a supply arrangement with Ford Motor Co (NYSE:F), as the automaker seeks to expand its electric vehicle capabilities with the introduction of the F-150 electric pickup.

CNGR holds properties in the Democratic Republic of the Congo, Zambia, and Canada, and sells to clients in the United States, Europe, and portions of Asia.

Zhejiang Huayou and CNGR outperformed the majority of Chinese equities, which increased amid conflicting economic indications. The Shanghai Shenzhen CSI 300 blue-chip index increased by around 0.5%.

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