By Kate Yuan

(JW Insights) Aug 9 -- Approximately 40% of the suppliers for materials used in Tesla's electric vehicle batteries are Chinese companies, underscoring China's strong presence in a sector that holds strategic importance, Nikkei Asia reported on August 9.

China was the largest supplier of materials for the lithium-ion batteries used in Tesla's EVs, constituting 39% of the 61 companies in the "storage battery" category, the report said.

The data is based on Nikkei’s work with Tokyo's Fronteo, which uses an original machine-learning algorithm to find data with specific characteristics, to analyze Tesla's supply chain.

They identified 13,428 companies believed to supply items for Tesla's EV production down to "quinary" suppliers after analyzing public information included in financial statements and press releases using artificial intelligence.

Chinese companies that were found to be vital suppliers for Tesla included Ganfeng Lithium, a major maker of lithium products, Novoray, a major producer of inorganic compounds, and cobalt materials maker Zhejiang Huayou Cobalt.

Nikkei pointed out that heavy dependence on Chinese suppliers may entail risks. An EV maker faces the risk of production disruptions if a leading supplier of a key component stops shipping the product to the manufacturer.

"As we look ahead a few years, a fundamental chokepoint in the advancement of electric vehicles is the availability of battery-grade lithium," Tesla CEO Elon Musk said at the groundbreaking ceremony for a Texas lithium refinery in early May. The $375 million facility is designed to produce enough of the battery metal to build about 1 million EVs by 2025.

Tesla has worked to boost the resiliency of its lithium supply chain. The company buys lithium from suppliers such as Albemarle and Livent of the U.S. as well as China's Ganfeng, a report Tesla released in 2022 shows.

Ganfeng signed a three-year contract to supply battery-grade lithium products to Tesla in 2021, and the U.S. automaker inked a five-year lithium supply agreement with Australia's Liontown Resources in 2022, said the Nikkei Asia report.