SHANGHAI/HONG KONG/WASHINGTON (Reuters) – Apple Inc is in early-stage talks with China’s CATL and BYD about the supply of batteries for its planned electric vehicle, four people with knowledge of the matter said.

The discussions are subject to change and it is not clear if agreements with either CATL or BYD will be reached, said the people, who declined to be named as the discussions are private.

Apple has made building manufacturing facilities in the United States a condition for potential battery suppliers, said two of the sources.

A senior official in U.S. President Joe Biden’s administration confirmed that condition on Tuesday.

“My understanding is that Apple is talking about building advanced battery production factories here, here in the U.S.,” Jared Bernstein, a senior White House economic adviser, told Reuters.

“That is completely consistent with what the president has talked about in terms of onshoring supply chains particularly in areas where we might grab global market share,” he said.

CATL, which supplies major car makers including Tesla Inc, is reluctant to build a U.S. factory due to political tensions between Washington and Beijing as well as cost concerns, the two people said.

It was not immediately clear if Apple is also talking to other battery makers.

Apple, which has yet to make a public announcement about its car plans, declined to comment. CATL, the world’s biggest automotive battery maker, and BYD, the world’s No. 4, also declined to comment.

Shares of BYD closed 6.5% higher in Shenzhen. CATL reversed earlier losses to finish 0.5% higher.

Apple is in favor of using lithium iron phosphate batteries that are cheaper to produce because they use iron instead of nickel and cobalt which are more expensive, the four people said.

It has been working on self-driving technology and has targeted 2024 for the production of a passenger vehicle, Reuters reported in December.

People familiar with the matter have previously said Apple’s planned EV could include its own breakthrough battery technology. It was not immediately clear if the discussions with CATL and BYD involved Apple’s own technology or designs.

The discussions come at a time when the U.S. government is looking to attract more EV manufacturing. Biden’s proposed $1.7 trillion infrastructure plan includes a $174 billion budget to boost the domestic EV market with tax credits and grants for battery manufacturers, among other incentives.

Many battery makers are ramping up production to meet soaring worldwide demand as car makers accelerate their shift to electric vehicles to comply with tougher emission rules aimed at tackling global warming.

Chinese battery makers are expected to grow at a faster pace than their foreign peers thanks to further expansion of the world’s biggest EV market, SNE Research said in a June report.

Reuters reported last week that CATL is planning a major new automotive battery plant in Shanghai, continuing a blistering pace of expansion that will cement its lead as the world’s No. 1 supplier. The factory would be near Tesla’s China manufacturing operations.

(Reporting by Zhang Yan in Shanghai, Julie Zhu in Hong Kong and Heather Timmons in Washington; Editing by Edwina Gibbs and Matthew Lewis)

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