Contemporary Amperex Technology Co Ltd plans to set up a factory with Stellantis NV for low-cost electric vehicles in Europe, as the Chinese battery giant continues to beef up its overseas presence.

On Tuesday, the two companies announced a preliminary agreement for the supply of LFP, or lithium iron phosphate, battery cells and modules for the automaker's EV production in Europe. They said that they were considering setting up a joint venture in the region.

Compared with the current nickel manganese cobalt batteries, LFP batteries are cheaper to produce and more affordable.

"CATL on LFP battery chemistry is another ingredient in our long-term strategy to protect freedom of mobility for the European middle class," said Stellantis CEO Carlos Tavares, adding that the move will bring "innovative and accessible" battery technology to its customers.