Tesla, Inc. signed a three-year contract with Panasonic Corp., whereby the Japanese battery manufacturer will roll out and supply 2170 lithium-ion battery cells at its Nevada-based Gigafactory.
The agreement, which took effect April 1, 2020 to Mar 31, 2023, will cover the conditions of Panasonic's commitments to production capacity and Tesla's commitments to purchase volume for the first two years of the deal. Tesla has also revised its terms and conditions with Panasonic, changing the term to expire 10 years after the company achieves certain output goals.
Panasonic is no longer Tesla's sole battery provider, but has been able to improve the US joint battery operations as demand for Tesla's electric vehicles climb. Last month, Tesla posted its third straight quarterly profit despite the ill effects of the global health crisis on its business, taking investors by surprise.
The latest deal builds on previous contracts between Panasonic and Tesla in connection with the production and supply of lithium-ion battery cells. Panasonic poured in $30 million in private placement of Tesla's common shares in November 2010.
The Chinese government has reportedly given Tesla the go-signal last week to build Model 3 vehicles in the country fitted with lithium iron phosphate batteries. The company is reportedly engaged in advanced talks to use CATL LFP batteries that does not contain cobalt - one of the costliest metals in batteries for electric vehicles - in cars manufactured at Tesla's China facility. Tesla's shares have more than doubled this year. Its stock has reversed less than 1 percent to end at $982.13 late Tuesday.
In 2019, Panasonic chief executive officer Kazuhiro Tsuga suggested that the manufacture of the Tesla Model could pressure battery cell supplies. A month before that, Tesla chief executive Elon Musk tweeted that Panasonic's battery manufacturing capacity had strained production of the Model 3.
Battery cells made at the Gigafactory were seen to begin churning a profit for Panasonic sometime in the run-up of Model 3 production.
Tesla and Panasonic wrapped up their joint manufacture of solar cells at the former's Buffalo-headquartered Gigafactory 2 facility in New York in February, after years of setbacks in ramping up unit production.
In 2016 the companies created the joint venture to make solar cells. Panasonic had initially agreed to pay $271.96 million for a portion of the equipment at the New York facility.
Meanwhile, the latest numbers indicate that Tesla sold 11,095 Shanghai-made Model 3 cars in China last month, Reuters reported. The figure is more than thrice the volume it made in April, the China Passenger Car Association (CPCA) disclosed.
