(Yicai) June 20 -- A unit of China’s Yahua Industrial Group has received an order to supply Tesla with lithium carbonate. Shares of the Chinese lithium salts producer rose.

Yahua Lithium Ya’an will supply the US electric car and battery maker with lithium carbonate, a raw material for producing lithium battery cathode, from next year to 2027, its parent company said yesterday. The deal includes an option to extend the period to the end of 2028.

The Chengdu-based company’s shares [SHE: 002497] closed 1.7 percent higher at CNY9.67 (USD1.33) apiece today, while the broader Shenzhen stock market fell 1.6 percent.

Yahua and Tesla signed a USD880 million five-year deal for lithium hydroxide in December 2020. Last August, they extended that by seven and a half years. As of the end of last year, Yahua had provided Tesla with CNY5.8 billion (USD799 million) of products, according to the supplier’s annual trading report.

The new order shows Tesla recognizes the quality of Yahua’s lithium salt products and its ability to sustainably develop in the lithium industry, the firm noted, adding that it will also enhance Yahua’s growth and deepen its long-term cooperation with the battery maker.

Yahua’s net profit halved to CNY40.2 million (USD5.5 million) last year, with the profit margin at its lithium salt business shrinking by 33.4 points to 5.6 percent, as prices sank. Revenue tumbled nearly 18 percent to CNY11.9 billion.

The company has formed long-term partnerships with many battery makers, including South Korea’s LG and SK On, Japan’s Panasonic, and China’s Contemporary Amperex Technology.

Editor: Futura Costaglione