Luke Ottaway's picture

Gigafactory takes big step forward as Panasonic signs contract with Tesla

It was a big news day for Tesla – in addition to releasing strong second quarter sales numbers, the company announced the long-awaited Gigafactory deal with battery supplier Panasonic.

Though we still do not know where the Gigafactory will be located, we do know it is one major step closer to reality. Panasonic has at last committed to the project after months of hesitation.

Panasonic agrees to be chief Gigafactory partner

Confirming an initial report by the Nikkei Asian Review earlier this week, Tesla issued a press release confirming that Panasonic has indeed signed an agreement to invest in the proposed $5 billion Gigafactory. An excerpt is below:

“According to the agreement, Tesla will prepare, provide and manage the land, buildings and utilities. Panasonic will manufacture and supply cylindrical lithium-ion cells and invest in the associated equipment, machinery, and other manufacturing tools based on their mutual approval.”

Other materials necessary for the battery packs, such as lithium, will be provided by an as-yet-unannounced network of suppliers. Approximately half of the 10 million square foot facility will be dedicated to cell manufacturing, while the remaining half will be for other key suppliers as well as module and pack assembly.

Cost reduction, Japanese-made cells, and the all-important location

The press release is light on details, but previous reports indicated that Panasonic would be responsible for $194 to $291 million in addition to the necessary machinery, which could bring its final bill north of $1 billion.

Tesla will achieve at least 30% cost reduction of its battery packs simply through the sheer scale of the Gigafactory, reducing costs by bringing its entire process under one roof and taking advantage of low utility and operating costs brought about by significant use of solar and wind power.

The press release also noted that Tesla will continue to purchase cells manufactured in Japan to meet demand, clarifying the difference between cell and pack output of the Gigafactory. The facility is planned to produce 35 GWh of cells and 50 GWh of packs by the year 2020.

In its letter to investors, Tesla confirmed that the Reno construction site that had been the source of great speculation is indeed a “[potential] location for the Gigafactory.” The company quickly followed up that statement by reminding us that the other four states remain under consideration, however.

Don’t expect a location announcement anytime soon, but Tesla is breathing a little easier after locking down its most important investor in its most important venture.


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