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Tesla to source Model 3 batteries from LG, Samsung?

Panasonic, meanwhile, suggests it can accelerate its investment plans for the Gigafactory.

Tesla Motors is reportedly exploring potential supply arrangements with Korean battery makers LG Chem, Samsung SDI and SK Innovations.

The automaker is said to be considering a diversified supply network for its Model 3 sedan, which will require an enormous volume of batteries just to fulfill the current ore-order tally of 373,000 units.

The Korea Times claims LG Chem -- the world's largest battery manufacturer -- is the leading candidate due to favorable output capacity, pricing and on-time delivery.

The report raises questions about Tesla's own Gigafactory ambitions and its existing battery-production agreement with Panasonic. The company recently moved its 500,000-unit production target to 2018 from the previous 2020 target. The reported negotiations with Korean suppliers suggest Gigafactory output and Panasonic cells may be insufficient to keep up with demand.

"Given the size and complexity of this undertaking, the cost of building and operating the Gigafactory could exceed our current expectations and the Gigafactory may take longer to bring online than we anticipate," Tesla warned in a recent SEC filing. "We have no direct experience in the production of lithium-ion cells."

Following the KT report, Panasonic suggested it will consider accelerating its promised $1.6 billion Gigafactory investment. Initial production is scheduled to kick off later this year, but ramping up to full volume could take much longer.

"We will do our best to move up the schedule if requested," Panasonic senior managing director Yoshio Ito told reporters, as quoted by Reuters. "We just don't want to be a bottleneck."

Tesla has been chronically late with its product launches including the Roadster, Model S and Model X. Each model faced no direct competition at the time, mitigating any negative impact from the delays, however similar problems with the Model 3 could have broader implications for the company's long-term growth.

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