The Tesla Model 3’s $35,000 price tag will be enabled in part due to a significant reduction in battery cost through the automaker’s partnership with Panasonic on the Gigafactory in Nevada. While Tesla owns and operates the giant battery factory, Panasonic is still in charge of battery cell production at the plant, which Tesla then uses to make battery packs for its vehicles.

With the strong demand for Tesla’s vehicles, Panasonic now says that it expects its battery sales to double within the next 3 years – or after the first full planned year of Model 3 production.

The news comes from Panasonic executive Kenji Tamura (via Reuters):

“Kenji Tamura, an executive officer in charge of Panasonic’s automotive and industrial systems business, said he expects the firm’s annual automobile battery sales to grow to 400 billion yen ($3.98 billion) in the business year through March 2019 from 180 billion yen in the year ended March 2016.”

Panasonic is the exclusive supplier of battery cells for the Model 3 through its deal with Tesla at the Gigafactory.

The Japanese electronic giant plans to invest up to $1.6 billion at the factory – or about one-third of the total expected cost of the production facility. Its investments will mainly take the form of battery cell manufacturing equipment. The first line will be ready by the end of the month according to a building permit for a $51 million project about the installation of  ‘battery cell manufacturing equipment’ at the plant.

Tesla CEO Elon Musk recently referred to Panasonic’s manufacturing equipment at the factory as the most impressive machines there and he added that “the exit rate of [battery] cells from the Gigafactory will be faster than bullets from a machine gun.

We recently reported on Panasonic “gearing up for significant growth” at the Gigafactory  –  the company hosted a special invitation-only hiring event on location last month for “positions in advanced manufacturing”.

The company is expected to start production by the end of the year and ramp up to full capacity by the end of the decade. The total battery output in packs at the plant is expected to be higher than the battery cells manufactured by Panasonic – with the difference coming from the company’s other battery plants or even from other manufacturers.

The Model 3 will use a new bigger and taller 20700 cell format, which could also be introduced to other vehicles in Tesla’s lineup. The factory also already produces battery packs for Tesla’s stationary energy storage products: Tesla Powerwalls and Powerpacks.

About the Author