By Christoph Steitz and Ben Klayman

(Reuters) – CATL is the largest global battery manufacturer and is currently undergoing final stages in vetting American sites to construct electric vehicles batteries. This investment would be the first for the Chinese company in America’s second-largest market for cars, according two sources who have knowledge of the matter.

Contemporary Amperex Technology Co. is currently in negotiations to open plants that will serve BMW AG (NYSE:) Co. The potential locations include South Carolina, Kentucky and other states where these automakers have their assembly plants. According to two sources, they asked to remain anonymous because of ongoing private talks.

According to one source, battery production would begin at South Carolina’s potential South Carolina facility in 2026. CATL already has BMW as a customer.

CATL declined to comment on behalf of Tesla (NASDAQ:), and Volkswagen (ETR.

Zeng Yuqun Chairman said that the company is exploring opportunities to localize manufacturing for automakers overseas in their respective countries.

According to him, CATL began mass production of overseas batteries in 2021. He stated that CATL was seeking to secure its position as the largest battery supplier for automakers abroad “in the next round” of supplier sourcing. This would be in 2026.

To meet the growing demand for EVs, Ningde-based Ningde Mining Company is increasing its production and sourcing minerals. Wood Mackenzie, a consulting firm, has stated that CATL will more than triple its capacity for cell production by 2025.

BMW announced in a statement, that the company was looking into the possibilities of opening a North American factory for battery manufacturing and buying materials. According to the company, “We have been in contact with many partners.”

Ford declined to comment but announced last September plans to construct two batteries plants in Glendale (Ky.) with SK. Ford has also two assembly plants for vehicles in Louisville, Kentucky.

As the U.S. government introduces measures to encourage EV investment, and Asian battery manufacturers gear up for building U.S. plants, CATL is considering the possibility of battery investments.

U.S. President Joe Biden said this week that the administration will provide more than $3B in infrastructure funding to support EV manufacturing. Biden calls for electric cars to make up 50% of the vehicles that are sold in America by 2030.

Other Asian firms that announced plans to construct U.S. batteries plants are Korea’s LG Energy Solution and SK Innovation, as well as Samsung (KS) SDI. Japan’s Panasonic Corp (OTC) Corp has reportedly also been redirected to purchasing land in order to construct a Tesla plant.

Spartanburg, South Carolina is the home of a BMW Assembly Plant. CATL is opening its first battery facility outside China in Arnstadt Germany later this year to support BMW and other carmakers. According to the company, CATL plans to invest $1.8 billion ($1.89 billion), in this factory. It will initially produce 8 gigawatt-hours of batteries annually.

BMW’s Spartanburg factory, which makes the best-selling X3 & X5 sport utility cars as well other models is one of Germany’s biggest and acts as a large export hub.

Oliver Zipse (BMW Chief Executive) reiterated on Thursday the German automaker’s goals to achieve 2 million fully-electric cars by 2025, and that EVs would account for at most half of worldwide deliveries by 2030. He stated that local suppliers were the best factor in EV production.

CATL bought a facility at Glasgow in Kentucky in 2020. The battery maker showed interest in establishing the facility according to documents from June 2020 meetings with Kentucky economic developers.

South Carolina’s economic development officers and Kentucky officials declined to comment.

The incentives offered by government agencies in these states for investment were not yet clear. It is also unclear if the plant would be open to joint venture participation from automakers.

CATL reported last month its first quarter profit drop in 2 years, due to rising raw material costs. Also disruptions caused by COVID-19 Chinese controls. On Thursday, it stated that it expects profit margins will improve due to the fact it increased prices for its second quarter and as raw material costs pressures have eased.

($1 = 0.9507 euros)