China’s CATL, a battery supplier to Tesla Inc (TSLA) and Nio Inc (NIO), has signed an agreement with the local government to build a manufacturing base in Shanghai, cnEVpost reported on Thursday. 

What Happened: The manufacturing base will double up as a global innovation center, an international functional headquarters, and a future energy research institute.

CATL's settlement in Shanghai is expected to logistically benefit Tesla's battery supply chain. The Elon Musk-led electric carmaker manages to keep prices of Chinese-made electric vehicles relatively lower helped by increased localization, cnEVpost noted.

Why It Matters: CATL is planning to raise up to $9 billion in a private share placement to fund six projects aimed at lifting the production capacity of lithium-ion batteries. The move comes at a time when CATL is expanding battery manufacturing capacity across China and in Germany.

Battery suppliers are adding capacities as automakers across the globe make a dash to either switch to electric vehicles or expand the existing electric lineup. 

Price Action: Tesla shares closed 3.5% higher at $688.99 on Wednesday