Panasonic plans to invest more than $100 million in increasing the capacity to produce batteries for Tesla.

The investment will be made in Gigafactory 1, a battery plant in Nevada that currently has 13 production lines. Panasonic plans to add yet another line, increasing capacity by 10% to 39 gigawatt-hours per year, Nikkei reported.

In May, Panasonic finance chief said the company is seeing strong demand for battery cells from U.S. partner Tesla, and they are in talks to expand their joint plant in Nevada, which is now profitable.

“We are in discussions right now” about expanding the plant’s capacity, said Hirokazu Umeda. According to him, this will be a necessity, since Tesla is experiencing growing demand. “We are seeing strong demand from Tesla” beyond the Nevada plant’s current capacity of 35-gigawatt hours per year, said Umeda.

Tesla & Panasonic In Talks To Expand Giga Nevada Hints Stronger Demand Ahead https://t.co/kN14yLsRJC pic.twitter.com/2cernSHYFw

— Tesmanian.com (@Tesmanian_com) May 18, 2020

The companies seem to have reached consensus. This is Gigafactory's first capacity expansion since it opened in 2017. Panasonic will also be upgrading batteries produced at Giga Nevada starting in September, increasing the capacity of each battery by 5%.

In late July, the Japanese company announced that it plans to boost the energy density of its “2170” battery cells it supplies to Tesla by 20% in five years and commercialize a cobalt-free version “in two to three years,” the head of its US EV battery business said.

According to industry experts, these cells already have an extremely high energy density--over 700 watt-hours per liter. Panasonic says it has been developing the technology since its launch three years ago, resulting in an increase in specific energy of more than 5% and a reduction in cobalt content to at most 5%, said its U.S. EV battery chief Yasuaki Takamoto. Both are interim results that should now be rapidly scaled up in line with the goals mentioned above.

Tesla Battery Partner Panasonic Plans To Boost 2170 Cells' Energy Density By 20% https://t.co/nH97Yi1WhQ pic.twitter.com/SS57PN3hVW

— Tesmanian.com (@Tesmanian_com) July 30, 2020

Prior tensions between the two companies began to ease due to several factors. First, thanks to its Tesla business, Panasonic continues to make a profit for the third quarter in a row. Secondly, Tesla has entered into an agreement with other battery manufacturers and is working to create its own production line. This encouraged Panasonic to change its attitude towards the company in order to remain competitive.

Tesla is seeing solid growth in sales and profits today, and both sides seem pleased. "This is not the time to worry about making major investments," a Panasonic official said. Tesla's global sales are forecast to be 500,000 vehicles this year, up 36% from the previous year.

With annual production capacity set to exceed 1 million vehicles next year, the capacity for battery production is also likely to increase, Panasonic officials say.

© 2020, Eva Fox. All rights reserved.

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