(Yicai Global) Sept. 23 -- JL Mag Rare Earth's shares soared by the exchange-imposed limit of 20 percent today on the news that the Chinese rare earth materials manufacturer will supply rare earth permanent magnets to US electric vehicle maker Tesla.

The firm's shares [SHE:300748] closed up 16.77 percent today at CNY43.93 (USD6.47) after reaching the exchange-imposed limit of 20 percent earlier in the day.

A parts purchase agreement was signed between the two parties on Sept. 21, the Ganzhou, eastern Jiangxi province-based firm said yesterday, without specifying quantities, product specifications or prices.

The rare earth permanent magnets it makes will be applied in the permanent magnet motors that Tesla uses in its rear-wheel drive Model 3 cars. These are a type of electric motor that uses both permanent magnets and field windings, making them more efficient than traditional induction motors.

The supply contract is order-based, meaning that Tesla can adjust purchases according to its actual needs. Hence it is not yet possible to give an accurate prediction of the impact of the deal on the company's financial performance, JL Mag added.

Tesla's Shanghai Gigafactory, which started operations in January, is gearing up for a huge rise in demand. The Palo Alto, California-based firm expects the Shanghai plant to produce 200,000 vehicles this year. And Chief Executive Elon Musk said yesterday at the annual shareholders’ meeting that he expects the factory to realize one million units a year soon.

Editor: Kim Taylor