Chinese battery maker Contemporary Amperex Technology Co Ltd. has confirmed its partnership with electric vehicles maker Tesla Inc. (NASDAQ: TSLA) in China.

What Happened

Ningde-based CATL has signed a two-year supplier agreement with Tesla, effective between July 2020 and June 2022, Reuters reported Sunday.

The Elon Musk-led EV maker will get to decide the battery purchase volume based on its needs, CATL said in a regulatory filing in China, according to Reuters.

Last Thursday, Reuters reported that Tesla signed battery supplier agreements with CATL and South Korea's LG Chem Ltd. (OTC: LGCLF). The companies involved didn't confirm any partnership at the time.

Why It Matters

The reports of the Tesla and CATL discussing a partnership have been floating around for nearly a year.

In March 2019, Bloomberg reported that the two were talking a battery supply deal for Tesla's first China-made car, the Model 3s; a preliminary agreement was confirmed later in November.

The partnership is a big blow to Japanese battery maker Panasonic Corporation (OTC: PCRFY), which was hitherto the sole supplier for all Tesla batteries.

Panasonic has declined to make batteries for Tesla in China. The automaker would have to either use the batteries made by Panasonic at its Nevada manufacturing plant or find another local supplier, the group's president Kazuhiro Tsuga said in November.

Tesla has been making rapid progress at its Chinese manufacturing plant, the Shanghai gigafactory.

The San Carlos-based automaker started delivering the Model 3s ahead of schedule in January and will be making the Model Y SUVs at the same plant.

Price Action

Tesla's shares closed 1.52% higher at $650.57 on Friday. The shares traded 0.74% lower in the after-hours market.

The Tesla stock skyrocketed, as the company beat Wall Street estimates in its fourth-quarter earnings report.

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