Tesla will buy nickel from the Nickel West business in Western Australia.
In addition to the supply agreement, BHP and Tesla will collaborate on ways to make the battery supply chain more sustainable, with a focus on end-to-end raw material traceability using blockchain; technical exchange for battery raw materials production; and promotion of the importance of sustainability in the resources sector, including identifying partners who are most aligned with BHP and Tesla's principles and battery value chains.
BHP will also collaborate with Tesla on energy storage solutions to identify opportunities to lower carbon emissions in their respective operations through increased use of renewable energy paired with battery storage.
BHP chief commercial officer Vandita Pant said the company was delighted to sign the agreement.
"Demand for nickel in batteries is estimated to grow by over 500% over the next decade, in large part to support the world's rising demand for electric vehicles," she said.
BHP Minerals Australia president Edgar Basto said Nickel West produced some of the lowest carbon intensity nickel in the world.
"Sustainable, reliable production of quality nickel will be essential to meeting demand from sustainable energy producers like Tesla Inc," he said.
"The investments we have made in our assets and our pursuit of commodities like nickel will help support global decarbonisation and position us to generate long-term value for our business."
Nickel West produced 89,000 tonnes of nickel in the 2021 financial year and has set FY22 guidance at 85,000-95,000t of nickel.
First production from the new nickel sulphate plant at Kwinana is due in the current quarter.