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Tesla & Panasonic Finally Sign Lithium-Ion Gigafactory Agreement

You have surely heard of the battery Gigafactory that Tesla Motors wants to build so that it can manufacture lithium-ion batteries on a very large scale. Panasonic, Tesla’s current lithium-ion battery cell supplier, was reportedly unsure about it, as Panasonic saw the Gigafactory as quite “risky.” However, it has now signed an agreement with Tesla on how the two will jointly carry out construction of this factory in the United States, including the roles each will play.

Tesla Model S EV at the Detroit Auto Show

Tesla Model S at the North American International Auto Show (NAIAS). Image Credit: Nicholas Brown (Kompulsa) / CleanTechnica.

According to the agreement, Panasonic Corporation will occupy about half of the planned manufacturing space; manufacture and supply cylindrical lithium-ion cells; invest in the associated equipment, machinery, and other manufacturing tools based on “their mutual approval.” Third-party manufacturers will provide the required precursor materials. Tesla Motors will use the Panasonic cells to assemble lithium-ion battery packs and modules for electric vehicles and stationary applications.

For the time being, Tesla will continue to purchase Panasonic’s Japanese-built batteries so that it can meet its projected demand.

This Gigafactory is intended to not only meet projected electric vehicle battery demand, but to reduce the cost of the batteries via economies of scale due to its high production capacity. This is instrumental in helping Tesla Motors manufacture its highly anticipated, low-cost, and potentially revolutionary Model III vehicle for the masses.

As for Panasonic, this could be a significant source of revenue for its lithium-ion battery business. If this is as successful as Tesla Motors and Panasonic hope it will be, it could lead to cheaper lithium-ion batteries in general, as this innovative new factory will serve as proof-of-concept to the rest of the li-ion battery and EV manufacturers, leading to cheaper vehicles from them, which the electric vehicle industry needs more than almost anything.

JB Straubel, Chief Technical Officer and Co-founder of Tesla Motors, says:

The Gigafactory represents a fundamental change in the way large scale battery production can be realized. 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.

The Tesla Motors press release says that this project can achieve economies of scale that were previously unattainable by li-ion battery factories.

Yoshihiko Yamada, Executive Vice President of Panasonic, adds:

We have already engaged in various collaborative projects with Tesla toward the popularization of electric vehicles. Panasonic’s lithium-ion battery cells combine the required features for electric vehicles such as high capacity, durability and cost performance. And 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.

This factory is expected to attain production of 35 GWh of lithium-ion cells and 50 GWh of battery packs annually by 2020.

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