MILAN Carmaker Stellantis and Chinese EV battery giant CATL said on Tuesday they signed a preliminary agreement for the supply of battery cells and modules for the automaker's electric vehicle (EV) production in Europe.

The two companies said in a joint statement they were also considering a possible investment to set up a 50-50 joint venture to support the automakers' electrification strategy.

Based on the agreement, for which financial details were not provided, CATL will supply lithium iron phosphate (LFP) batteries to the Franco-Italian automaker, owner of brands including Jeep, Peugeot, Fiat and Alfa Romeo.

LFP batteries will allow Stellantis to offer high-quality, durable and affordable EVs in the passenger car, crossover and small and medium sized SUV segments, they said.

Stellantis and CATL said the memorandum of understanding (MoU) announced on Tuesday outlined a long-term collaboration between the two groups, including "identifying opportunities to further strengthen the battery value chain".

"We believe the partnership will be a decisive step on both parties' journey towards carbon neutrality goals," CATL Chairman and General Manager Robin Zeng said.

Stellantis CEO Carlos Tavares said the MoU on LFP battery chemistry was "another ingredient in our long-term strategy to protect freedom of mobility for the European middle class".

For its EV battery needs in Europe Stellantis is building three gigafactories, in France, Germany and Italy through its ACC joint venture with Mercedes and TotalEnergies, while others might follow in the region. Since its creation in early 2021 through the merger of Fiat Chrysler and Peugeot maker PSA, it has lined up several supply agreements for materials needed for its global EV production.

(Reporting by Giulio Piovaccari; Editing by Chizu Nomiyama)