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Panasonic has partnered with Tesla Motors to construct batteries in the United States at the electric vehicle company’s new battery manufacturing plant, the Gigafactory.

The Japanese electrical giant will manufacture and supply cylindrical lithium-ion cells as well as invest in the Gigafactory’s equipment, machinery and other associated manufacturing tools.  

Elon Musk, Tesla’s CEO, is gambling that the company’s massive Gigafactory will enable a continuous reduction in battery costs. Tesla is predicting that the economies of scale from the 1,000-acre factory will drop the battery pack cost/kWh by 30% in 2017. By 2020, production from the Gigafactory is predicted to exceed the whole 2013 production.

Under the agreement, Tesla has committed to continue purchasing Panasonic’s batteries from its various factories in Japan.

Commenting on the deal, JB Straubel, chief technical officer and co-founder of Tesla Motors said: "The Gigafactory represents a fundamental change in the way large-scale battery production can be realised. Not only does the Gigafactory enable capacity needed for the Model 3 but it sets the path for a dramatic reduction in the cost of energy storage across a broad range of applications."

Yoshihiko Yamada, executive vice president of Panasonic, added: "We have already engaged in various collaborative projects with Tesla toward the popularisation of electric vehicles…I believe that once we are able to manufacture lithium-ion battery cells at the Gigafactory, we will be able to accelerate the expansion of the electric vehicle market."

The Gigafactory is predicted to produce 35GWh of cells and 50GWh of packs per year by 2020. Tesla projects that the Gigafactory could employ about 6,500 people by 2020.

Tesla inks Gigafactory partnership deal with Panasonic

Under the terms of the agreement, Tesla has agreed to continue to purchase Panasonic's Japan-made batteries. Image: wikimedia User: Mariordo.

Tags: tesla, panasonic, lihtium-ion, gigafactory, cost reduction, elon musk