TESLA Inc. is in discussions with Chinese battery maker Contemporary Amperex Technology Co. Ltd. (CATL) for ordering rechargeable batteries to power its Model 3 cars it will assemble at the new Shanghai factory, Bloomberg reported Monday, quoting sources familiar with the matter.

CATL has been in talks with Tesla officials about the required specifications for the batteries, according to the Bloomberg report, which added that there was no guarantee that an agreement would be reached.

In January, sources said that Tesla had signed a preliminary agreement with China’s Tianjin Lishen to supply batteries for its new Shanghai car factory.

For CATL, winning orders from a high-profile customer like Tesla would bolster its profile as one of the world’s emerging battery-making power houses. Based in China’s southern Fujian Province, the company is on course to become the biggest manufacturer of lithium-ion batteries in China.

In a statement yesterday, CATL said it hasn’t reached an agreement with Tesla on cooperation or signed any business pact. The company didn’t say whether it is in talks with the U.S. electric car manufacturer.

Securing a supply of battery cells in China, the world’s biggest car market, will be key to Tesla’s efforts to open its first plant outside the United States. The carmaker, which has a battery-supply relationship with Panasonic Corp., said in its latest annual report that it has one “fully qualified” cell vendor and that it was working to add more.

Chief executive officer Elon Musk made a surprise decision last month to wind down most of the company’s stores, but walked back that plan late Sunday.

Meanwhile, Tesla is continuing to build a major facility in Shanghai amid China’s worst car sales slump in a generation.

Shanghai Construction Group (SCG) will build the first phase of Tesla’s factory in Shanghai, Xu Jiandong, a vice president at SCG, was quoted by Shanghai Observer as saying last week.

A Shanghai city government official said last week that they expect Tesla’s vehicle assembly facility to be completed in May this year.

Tesla said last week it had secured as much as US$521 million in loans to build the factory. It also opened the door to obtaining more funding by amending a separate asset-backed credit agreement, increasing how much it can borrow by as much as US$700 million.(SD-Agencies)