Tesla Now Has Panasonic on Board for Its Gigafactory

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As Tesla Motors (NASDAQ:TSLA) builds toward its first mass-produced electric vehicle, the automaker has been looking for investors to finance more than 50 percent of the money needed for its massive battery Gigafactory. According to a statement released Thursday on its website, Tesla confirmed that at least part of that help will come from Panasonic Corp. (PCRFY.PK), the company that already supplies batteries for the Model S.

The statement said an agreement had been signed that would have Tesla in charge of building, land, and utility interests at the Gigafactory, while Panasonic would manufacture lithium-ion cells and invest in the equipment necessary for their production. The automaker will take cells produced in the Gigafactory, along with cells it will continue buying from Panasonic factories in Japan, and assemble battery packs for its vehicles. Other suppliers will provide raw materials and related elements necessary for the large-scale project.

Tesla projected it would invest around $2 billion in the Gigafactory, which would require between $4 billion and $5 billion in investment through 2020, at which time the company plans to produce 500,000 vehicles on an annual basis. That goal requires a supply of battery packs that is far beyond today’s capabilities, creating the need for this massive production facility that would trump the annual global output.

Despite the announcement, both parties made it clear that Panasonic had not agreed to a specific dollar amount for the Gigafactory investment. Panasonic CFO Hideaki Kawai told reporters in Tokyo that the investment would be done in increments.

“We will reach a plan that is profitable,” Kawai said in reference to Panasonic’s interests, Bloomberg reports. “We will do step-by-step investment to meet the gradually growing needs.”

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Tesla Chief Technical Officer JB Straubel said in a company statement that the Gigafactory would enable production of the Model 3 while charting a path for savings in energy storage for a variety of applications. “The Gigafactory represents a fundamental change in the way large-scale battery production can be realized,” Straubel said.

Yoshihiko Yamada, executive vice president of Panasonic, was enthusiastic about the deal with respect to the EV industry as a whole. “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,” Yamada said.

Bloomberg reports that critics of the proposed partnership say it would have a “considerable” negative impact on Pansonic, which owns 1.1 percent of Tesla, if Tesla cannot sell the cars according to the automaker’s projections.

There is a lot of pressure on Tesla to pull off the different aspects of the job, but selling cars has yet to be a problem for the automaker. If the rollout is similar to the Model S and Model X, the reservations will come fast and furious for the most affordable Tesla yet.

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