Tesla Motors has partnered with South Korean battery maker LG Chem for the battery upgrade to its first car, the Roadster, the company said on Wednesday. The EV firm confirmed the agreement with LG after a Japanese news agency claimed that the two firms are in negotiations on a battery contract, says a report from The Wall Street Journal.

Tesla Motors Inc Partners With LG Chem For Battery Supply

Tesla – LG deal a threat to Panasonic

Tesla offered the original Roadster customers the option to upgrade their vehicle for $29,000, allowing them to replace their battery pack and receive several other improvements. The new battery pack boosts the range of the vehicle to around 400 miles, representing a 35% increase.

Prior to this deal, Tesla had only one known supplier for batteries – Japan’s Panasonic. Panasonic and Tesla are also co-developing a $5 billion battery factory outside of Reno, Nev. The Japanese firm also supplies cells for the Model S and the Model X SUV. This supply agreement makes Panasonic the largest lithium-ion battery maker for electric cars.

Panasonic sees the automotive business as a growth pillar, and the LG-Tesla deal could come as a major blow to the company as now it will have to face competition in serving its key customer. Panasonic is a global leader in automotive lithium-ion batteries with a 46% market share.

LG gaining in popularity among electric car makers

LG has been gaining traction as a battery producer as it makes use of high-quality materials, because of which its batteries last longer than others. For this reason, it has earned a good name among car makers. General Motors obtains batteries for its Chevrolet Volt plug-in hybrid and for its Chevrolet Bolt, which is a fully electric car, from LG.

The Chevrolet Bolt is expected to cost around $30,000 and will reportedly have a range of 200 miles. It is twice the range of Nissan’s Leaf electric car, which has a starting price of $28,600. Ford, Audi and Renault are few other big automakers LG has deals with. Nissan-Renault CEO Carlos Ghosn, who believes LG makes the best cells for electric cars, is evaluating whether he should use the company’s battery in forthcoming Nissan electric cars, says The WSJ.

On Tuesday, Tesla shares closed down 2.28% at $210.35. Year to date, the stock is down by over 5%.