Silicon Valley electric-car start-up Lucid Motors said it has entered a "strategic supply agreement" with South Korean giant LG Chem (NASDAQOTH: LGCLF) for lithium-ion battery cells for Lucid's upcoming electric luxury sedan, the Air.

The news was something of a surprise, as it follows an announcement earlier this month of a similar deal between Lucid and LG Chem's huge rival, the Samsung SDI unit of Samsung Electronics (NASDAQOTH: SSNLF). But if anything, it's one more reason investors interested in electric cars should be watching Lucid's effort closely. 

Lucid

Lucid Motors hopes to begin production of its first car, the Air luxury sedan, by the end of 2018. Image source: Lucid Motors. 

What Lucid said about the LG Chem deal

In a statement, Lucid said the new agreement "establishes LG Chem as one of the key suppliers of cells for Lucid's products" (emphasis added). The cylindrical battery cells LG Chem will produce for Lucid use a "proprietary chemistry" developed jointly by the two companies. 

Lucid's statement directly acknowledged the existing relationship with Samsung SDI:

Lucid has recently announced a separate battery cell supply agreement with Samsung SDI. Although both supply agreements are intended for Lucid's first vehicle, there are other possible applications for these cells. These could include batteries developed for other companies as part of Lucid's powertrain supply business, or variants of the sedan with specific performance requirements. The differing performance attributes available from the two cell suppliers provide Lucid with maximum flexibility to select the best cell for each application.

Lucid has very high expectations for the cells that are used in our batteries, and we are fortunate to have two companies that are willing and able to work with us to meet our requirements.

So, what's going on here?

Two deals with two heavyweight rivals

In one sense, it's not surprising that Lucid would seek a deal with LG Chem, which is already an established player in the still-new market for lithium-ion cells for automotive applications. Most notably, it supplies the cells (and some other parts) for General Motors' (NYSE:GM) Chevrolet Bolt EV, and it has been aggressively building production capacity and seeking other clients around the world. (The Bolt's cells use a different proprietary chemistry owned by GM.) 

Of course, we could make a similar case for Samsung SDI. Samsung, which has made lithium-ion cells for consumer applications for years, ramped up its electric-car efforts when it acquired an automotive battery-pack business from Magna International in 2015. That was one of several moves it has made over the last couple of years in an effort to build a sizable business as a top-tier auto-industry supplier. Samsung SDI now supplies batteries for BMW's "i" vehicles and Fiat Chrysler Automobiles' electric Fiat 500e. 

Simply put, both Korean companies are established heavyweights jockeying for position as electric vehicles become more commonplace. Meanwhile, aside from a few hand-built prototypes, Lucid has yet to build a single car -- but it has managed to get deals with both to supply batteries for its future products. 

How did Lucid do that? And why?

The answer to the "how" may be found in Lucid's history. The company now known as Lucid Motors was originally called Atieva, and it was originally founded in 2007 to develop advanced battery packs for electric vehicles. In its initial incarnation, Ateiva reportedly did electric-vehicle design and engineering work for GM, Tesla Motors (NASDAQ:TSLA), and Audi, and it also did some work on battery packs for electric buses in China. 

Ateiva's direction changed in 2014 after a big fundraising round intended to jump-start its development of a line of electric cars (and its name changed in October). But the company retains deep expertise in batteries and battery packs for electric cars -- and possibly, as its statement about the LG Chem deal hints, for other applications as well. That's probably why both Samsung SDI and LG Chem were willing to make deals.

As for why, Lucid hasn't quite spelled it out. But there are many Tesla veterans on Lucid's team (including CTO Peter Rawlinson, who was the chief engineer on Tesla's groundbreaking Model S). The company often seems determined to out-do its larger electric-car rival -- or at least to make a point of showing that it has learned from Tesla's mistakes. 

In this case, it's worth noting that Tesla has a deep relationship with one primary battery supplier (Panasonic). Lucid may feel that Tesla's dependency on a single battery supplier exposes it to some risk that could be hedged by having strong relationships with two big suppliers.

More evidence that Lucid is for real

The deal with LG Chem is another sign that Lucid is a serious effort worth watching closely. Lucid is planning to break ground on its new factory in Arizona sometime in the second quarter of 2017, and it's hoping to begin shipping its first model (the Air sedan) by the end of 2018. 

Those dates may slip. However, my sense is that Lucid and its car are for real, and it looks like a couple of very big suppliers agree. 

John Rosevear owns shares of General Motors. The Motley Fool owns shares of and recommends Tesla Motors. The Motley Fool recommends BMW and General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.