Tesla expanding “circle of friends” in China regarding supply chain

Shanghai (Gasgoo)- In recent days, several Chinese companies, including CATL, Joyson Electronics, Yinlun Co.,Ltd (Yinlun)., and Huada Automotive Technology Co.,Ltd. (Huada Technology), successively announced their fixed or potential partnership with Tesla, which also aims for a closer cooperation with China's local suppliers.

On Feb. 7, Jiangsu-based Huada Technology claimed it formally became one of Tesla's suppliers on May 29, 2019, providing stamping parts for the China-built Model 3s and Model Ys. Based on the capacities of the targeted parts and Tesla's vehicles, Huada Technology expects the revenue related to the Tesla business to reach around RMB100 million in 2020, accounting for roughly 2.5% of its full-year revenue in 2019.

Joyson Electronics stated several days ago its subsidiary, Shanghai Lingang Joyson Safety Systems Co.,Ltd., would offer such parts as airbags, safety belts, steering wheels and car window switches to the China-built Model 3s and Model Ys. The order value totals about RMB1.5 billion.

Prior to the latest deal, Joyson Electronic has already served as a global supplier to Tesla. Another favorable factor is that the supplier's Lingang factory is only three kilometers away from Tesla's Gigafactory 3.

Yinlun Co.,Ltd., a China's local heat exchanger manufacturer, said on Feb. 6 it had been certified by Tesla's quality system, and both parties were proactively pushing ahead with the cooperation in many businesses like thermal management. However, when the announcement was prepared, it has not received a formal notification from Tesla.

CATL must be the most eye-catching one. The Ningde-based battery giant confirmed on Feb. 3 it would provide Tesla with lithium-ion power batteries from July 1, 2020 to June 30, 2022. As of the statement, the agreement had been signed by CATL and Tesla, Inc., while it still awaited the approval from Tesla (Shanghai) Co.,Ltd, a wholly-owned subsidiary of Tesla, Inc.

To grab more market shares in China, Tesla might seek to lower its prices. Thus, the EV maker needs to work more closely with China’s local suppliers, replacing the imported parts with homegrown ones. It is also a critical part of the efforts to achieve 100% of components sourced locally by 2020, up from the current 30%.