Beijing — Tesla agreed to buy batteries from South Korea’s LG Chem to be used in electric vehicles (EVs) produced in China, according to people familiar with the matter.

Batteries made by LG Chem will be used initially in Model 3 cars manufactured in the plant near Shanghai, Tesla’s first outside of the US, said the people, asking not to be identified discussing a private matter. LG Chem batteries will also be used in Model Ys produced there once the compact crossover car is released, they said. Shares of LG Chem jumped...

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