STELLANTIS and China’s Contemporary Amperex Technology plan to set up a factory for low-cost electric-vehicle batteries in Europe, deepening ties between the Fiat maker and Chinese companies.

The plant will make so-called lithium-iron-phosphate batteries, Stellantis said on Tuesday (Nov 21), adding that no decision has been made on its size or exact location. The partners are also considering a joint venture in which both contribute equally.

Lithium-iron-phosphate batteries have been gaining traction with automakers because they’re cheaper and more stable than nickel-based cells used in most EVs. While they have a lower energy density that results in shorter driving distances, their performance has been improving with technology advances.

“Today we have zero capacity of production of LFP in Europe,” Maxime Picat, Stellantis’ executive vice-president and global head of purchasing and supply chain, told reporters. “For the next five to ten years, it will be a very important technology.”

Stellantis’ partnership with CATL would be among the most wide-ranging such agreements in Europe, where officials are planning tighter rules around batteries to help nurture a local supply chain. chief executive officer Carlos Tavares last month struck a US$1.6 billion deal for a stake in Chinese EV maker Zhejiang Leapmotor Technology Ltd. to help plug a hole in a crucial market in the global EV transition.

China’s battery makers supply some 80 per cent of cells globally, while Chinese firms also have significant mining and processing facilities both at home and abroad. The country’s stranglehold on the EV supply chain has become a source of geopolitical tension with the US and Europe.

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CATL, which supplies the likes of Tesla, Volkswagen and Hyundai, dominates the global battery market. While its US$3.5 billion plant project with Ford Motor Co. in Michigan has been mired in controversy, the manufacturer is charging ahead with plans to build a facility in Hungary and in January started output at a factory in Erfurt, Germany, to supply BMW. BLOOMBERG