Tesla reaches new deal with Panasonic for battery supply

Tesla has reached a new three-year deal with Panasonic for battery supply from Gigafactory Nevada.

The growth of Gigafactory 1 in Nevada has been impressive, and the factory quickly became the largest li-ion battery factory in the world. But last year, Tesla said that Panasonic’s battery cell production was limiting Model 3 production.

Initially, Panasonic invested $1.6 billion in the factory to reach a battery cell production capacity of 35GWh.

The company had issues reaching the target, and according to recent reports, the Tesla-Panasonic relationship has hit hard times as Tesla is making moves to make its own batteries.

They were supposed to keep growing the factory, which Tesla said could eventually produce up to 105GWh of battery cells and 150GWh of battery packs in order to support Tesla’s growing business.

With Tesla making moves to produce its own batteries and Panasonic having a hard time ramping up, these plans for expansions have reportedly been put on hold.

However, we heard indications that Panasonic was still open to growing at Tesla Gigafactory late last year, and the Japanese giant announced that it is finally making money at Gigafactory Nevada last month.

Now Tesla has announced that they amended their deal with Panasonic for batteries produced at Gigafactory Nevada:

On June 10, 2020, Tesla, Inc. and Tesla Motors Netherlands B.V. (collectively, “Tesla”) and Panasonic Corporation and Panasonic Corporation of North America (collectively, “Panasonic”) entered into an amendment and restatement (the “2020 GTC”), of the General Terms and Conditions entered into between Tesla and Panasonic on October 1, 2014, as amended, which governs certain agreements for Panasonic to manufacture lithium-ion battery cells for Tesla at Gigafactory Nevada. The 2020 GTC, among other things, modifies the term to expire 10 years after Panasonic achieves certain manufacturing milestones.

Tesla didn’t go into details, but it mentions that the new deal relates to “specific terms between the parties with respect to pricing, planned investments and new technology, as well as production capacity commitments by Panasonic and purchase volume commitments by Tesla over the first two years of the Agreement.”

Electrek’s Take

This is very interesting.

Obviously, we don’t have the details of the agreement, but if I was to speculate, I’d presume that Panasonic has agreed to increase its investment in Gigafactory Nevada in order to increase volume and produce new batteries designed with Tesla.

It might also mean that we might finally see the factory expand beyond its current structure after years of the building looking the same.

The details are likely to be announced at Battery Day since it’s likely part of the broader battery supply plan.