To boost its battery production capabilities, Tesla has entered into a three-year supply agreement with China’s Yahua Industrial Group for the provision of lithium carbonate, a critical component in electric vehicle (EV) batteries. This deal emphasizes the growing demand for lithium-based products amidst the global surge in electric vehicle production.
Under the terms of the agreement, which begins in 2025, Yahua Lithium Ya’an, a subsidiary of Yahua, will supply Tesla with an unspecified quantity of lithium carbonate through 2027, with an option to extend the agreement for an additional year. The pricing for the lithium carbonate will be set according to a method mutually agreed upon by both parties, reflecting the dynamic nature of commodity prices in the global market.
This new deal builds on a prior arrangement between Yahua and Tesla, which involved Yahua supplying between 63,000 to 88,000 tonnes of lithium hydroxide to Tesla over a four-year period, from 2021 to 2025. This contract, valued at $880 million, was extended in August of the previous year to include an additional supply of 207,000 to 301,000 tonnes over an extended 7.5 years, demonstrating the deepening partnership between the two companies.
By the end of 2023, Yahua had already delivered lithium products worth approximately 5.8 billion yuan ($799 million) to Tesla, as reported in the group’s annual trading statement. This ongoing relationship highlights Tesla’s strategy to secure a stable supply of essential materials needed to meet the escalating demand for its electric vehicles.
Yahua, headquartered in Sichuan, China, primarily operates in the industrial explosives sector but has significantly expanded its footprint in the electric vehicle battery industry. The company is noted for being among the first in China to produce lithium hydroxide, a key ingredient for high-performance EV batteries.
Beyond its manufacturing capabilities, Yahua has also invested in several lithium mining projects globally, which include the Kamativi mine in Zimbabwe. This particular mine has already commenced production of lithium, a battery essential, and is anticipated to reach full production capacity within the year.
Additionally, Yahua holds offtake agreements with other lithium mining operations, including those with Vancouver-based Sigma and Australia’s Pilbara Minerals. These agreements ensure Yahua has a diversified source of lithium, crucial for meeting its supply commitments to major clients like Tesla, Contemporary Amperex Technology Ltd.—the world’s largest battery maker—and South Korea’s giants LG and SK On.
This strategic alliance with Yahua is part of Tesla’s broader effort to ensure a consistent and reliable supply chain for the raw materials that are critical to battery production, as the company scales up its vehicle production to meet global demand.
