| 11:37 AM EST

Panasonic to Work with Tesla on Next-Gen Battery

Expansion planned for Nevada Gigafactory
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Last month Tesla detailed a new low-cost, high-performance battery that it’s developing and plans to produce itself.

But the carmaker will continue to count on supplier partners to help meet growing demand as it continues to expand its electric vehicle lineup.

Not surprisingly, longtime supplier Panasonic will be part of the mix.

In the Know

During a presentation to analysts today regarding the company’s second-quarter earnings, Chief Financial Officer Hirokazu Umeda said Panasonic began working on the so-called 4680 battery immediately after Tesla announced it.

"We have considerable know-how for that battery," Umeda says, adding that the company is setting up a prototype production line for the 4680 cells at the Gigafactory joint venture Panasonic operates with Tesla in Nevada.

The partners also are adding another production line at the Nevada site, which Umeda says will boost the facility’s annual capacity 10% to as much as 39 gigawatt-hours by 2022.

Profit Center

Panasonic expects the expanded capacity and new battery will be good for business.

The company, which previously struggled to keep pace with Tesla’s rising production volume, is targeting a 5% profit margin on its sales to the carmaker within three years, Umeda says.

And the supplier already is starting to cash in. In July-September, Panasonic’s operating profit jumped 11% to 92.8 billion yen ($886 million), thanks in part to its business with Tesla.

About the Battery

Dubbed the “biscuit tin,” the 4680 battery cell has a larger cylindrical format that provides five times more energy and six times more power than Tesla’s current battery system. The improvements will boost a vehicle’s driving range by 16%, according to Tesla.

The new design and improved manufacturing costs also are expected to cut battery costs in half. As a result, Tesla CEO Elon Musk says, the company will be able to launch a $25,000 EV by as soon as 2023.

What’s Next?

In addition to Panasonic, Tesla sources batteries from South Korea's LG Chem and China's Contemporary Amperex Technology. Those companies also are expected to be involved with the next-generation cells.

Meanwhile, Tesla is moving forward with its own pilot production line at a facility in Fremont, Calif.

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