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Good News! Tesla & Panasonic Come To 3-Year Deal For Gigafactory 1

Tesla & Panasonic have renewed their contractual relationship to produce batteries in Sparks, Nevada.

California-based Tesla and Japan-based Panasonic have come to a 3-year agreement in which Panasonic will manufacture and supply lithium-ion battery cells at the Gigafactory in Nevada. The agreement outlines the terms for production capacity commitments by Panasonic and purchase volume commitments by Tesla over the first 2 years of the relationship.

The deal, which became effective on the first day of Tesla’s second quarter, was disseminated to the public via a June 16 Tesla filing.

Other reports indicate that Tesla and Panasonic are in continued negotiations to expand the battery joint venture’s capacity. Panasonic had dropped hints last month that it was looking ahead to develop new batteries with Tesla, possibly with higher capacity.

Tesla broke ground on the Gigafactory outside Sparks, Nevada, in June 2014 and now produces more batteries in terms of kWh than all other carmakers combined, according to Tesla.

Last month, Tesla reported its third consecutive quarterly profit despite the economic impact of the coronavirus pandemic. Partially, this consistency is due to the all-electric car company’s ability to produce its own batteries. Batteries are one of the key differentiators between the various EV manufacturers. EV batteries, like many high-technology goods, have a complex supply chain in which production is separated into stages, and those stages are often completed in different locations.

The battery manufacturing supply chain has three main parts: cell manufacturing, module manufacturing, and pack assembly. Design of Gigafactory 1 optimizes simplicity, effectiveness, and minimization of effort, with Panasonic responsible for the cell manufacturing and Tesla handling the module manufacturing and pack assembly — all in the same facility. This manufacturing process in Nevada is indicative of supply chain efficiency at all Tesla Gigafactories.

In the 8-K from Tesla, Inc., the general terms and conditions of its partnership with Panasonic were modified, including the term to expire 10 years after Panasonic achieves certain manufacturing milestones.

“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. On June 10, 2020, Tesla and Panasonic also entered into the 2020 Pricing Agreement (Gigafactory 2170 Cells) (the “Agreement”), effective as of April 1, 2020 until March 31, 2023, relating to the manufacture and supply by Panasonic of lithium-ion battery cells at Gigafactory Nevada. The Agreement is subject to the 2020 GTC and, among other things, sets forth the 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. Tesla and Panasonic have also entered into other previously disclosed agreements relating to the production and supply of lithium-ion battery cells, and Panasonic invested $30.0 million in a private placement of Tesla common stock in November 2010.”

The amount of energy stored in the battery determines the range of the EV, and range is a big deciding factor when consumers decide on which EV is right for them. Just this week, Tesla announced via a blog post that all North American Model S Long Range Plus vehicles have an official EPA-rated range of 402 miles, representing a nearly 20% increase in range when compared to a 2019 Model S 100D with the same battery pack design.

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Written By

Carolyn Fortuna (they, them), Ph.D., is a writer, researcher, and educator with a lifelong dedication to ecojustice. Carolyn has won awards from the Anti-Defamation League, The International Literacy Association, and The Leavy Foundation. Carolyn is a small-time investor in Tesla. Please follow Carolyn on Twitter and Facebook.


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