Tesla has reportedly secured a battery supplier for its China Gigafactory - and it's not Panasonic

tesla chinaA man takes a photo of the logo on a Tesla Model S sedan at an event in Beijing, China, Tuesday, April 22, 2014. Tesla Motors delivered its first eight electric sedans to customers in China on Tuesday and CEO Elon Musk said the company will build a nationwide network of charging stations and service centers as fast as it can.Ng Han Guan/AP

  • LG Chem will supply Tesla batteries at its China factory, Bloomberg News reported Friday.
  • It's a big milestone for Elon Musk's company as it hopes to begin production in the country this year.
  • In the US, Tesla's relationship with current battery supplier Panasonic, has become strained, with Musk blaming the company for slower than expected production.
  • Visit Business Insider's homepage for more stories.

Tesla has signed an agreement with LG Chem to source batteries from the South Korean electronics giant for cars built at its planned Shanghai factory, which is expected to come online later this year, Bloomberg News reported Friday.

The batteries, an unnamed source told the outlet, will be produced about 200 miles away from Tesla's Chinese factory, and will be used in Model 3's at first, followed by the Model Y when it is released.

Tesla did not respond to a request for comment on the story from Business Insider.

Bloomberg also reported that Tesla was seeking to source battery components in China from other suppliers in addition to LG Chem, including Contemporary Amperex Technology.

In the United States, where all of Tesla's cars are currently produced, batteries are supplied through a partnership with Panasonic. Though in recent months, there have been reports that the two companies' relationship has become strained.

In April, CEO Elon Musk said that Panasonic's slow production was holding back Model 3 production, and had not yet reached the promised 35 gigawatt-hour planned capacity. At the time, insiders told Business Insider that Panasonic's side of the battery-making business in Nevada was plagued by chaos and wasted materials.

Read more: Insiders describe a world of chaos and waste at Panasonic's massive battery-making operation for Tesla

China production is key to Tesla's guidance and financial performance. The company told investors in its second quarter update in July that the factory's construction was on schedule.

"We are looking forward to starting production in China by the end of this year," the company said. Depending on the timing of the Gigafactory Shanghai ramp, we continue to target production of over 500,000 vehicles globally in the 12-month period ending June 30, 2020."

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