Tesla Inc. (NASDAQ: TSLA) shares continued their surge on Tuesday after a new report surfaced that the electric vehicle (EV) maker is looking to use cheaper Chinese lithium iron phosphate (LFP) batteries in its vehicles. Some are calling this a big departure from its normal battery strategy.

Also there have been reports that Tesla is switching to nickel manganese cobalt oxide (NMC) battery cells for its Model 3 vehicles built in its Gigafactory in Shanghai. Note that the EVs built in Shanghai are Tesla’s first without the Panasonic-made battery cells.

Note that LFP batteries are less popular in the auto industry and, for the most part, they are only used in some Chinese EVs due to their lower energy density.

Reuters recently reported that Tesla is in advanced talked with Contemporary Amperex Technology to use their LFP batteries at its Gigafactory in Shanghai. Also, it was reported that Tesla has contracted LG Chem for this as well.

Tesla has been talking to the Chinese manufacturer for more than a year to supply LFP batteries that will be cheaper than its existing batteries by a “double-digit percent,” said a person directly involved in the matter who was not authorized to speak with media and so declined to be identified.

A few analysts took their shot on Tesla on Tuesday morning as well:

• Cowen reiterated an Underperform rating and raised its price target to $290 from $280.
• Bernstein reiterated it as Underweight and raised its price target from $360 to $500.
• Morgan Stanley’s Adam Jonas has a bull case for Tesla with a $1,200 price target, up from the previous $650. However, his base case for the stock sees the stock valued at $500, up from $360.

Tesla stock traded up over 5% at $845.72 a share Tuesday, in a 52-week range of $176.99 to $968.99. The consensus price target is $467.53.

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