The $5 billion "Gigafactory" will allow for economies of scale in the production of batteries, thus reducing the price of electric cars. Image: Tesla Motors.

Tesla and Panasonic Team Up to Build 'Gigafactory' in Nevada

Japan

Japan’s Panasonic Corporation has signed a deal to help make Tesla Motors’ $5 billion ‘Gigafactory’ a reality. Although the details of the deal are yet to be disclosed, the Osaka-based company will invest “tens of billions of yen” according to a statement made by Panasonic’s CEO Kazuhiro Tsuga. Estimates suggest Panasonic’s investment could be as high as 100 billion yen (US$979 million).

The Gigafactory is the name given to the planned large-scale battery manufacturing plant, designed to produce cells, modules, and packs for Tesla's electric vehicles and for the stationary storage market. If successful, the vast size of the project will allow Tesla to achieve economies of scale, thus reducing the cost of their cars. The goal is to reduce the current cost of batteries by about 30% in order to expand the market for electric vehicles. In October, Tesla revealed a new high-performance version of the Model S, their most popular vehicle. The new car, dubbed the Model D, exceeds performance standards of some of the world’s top automobiles.

On the Gigafactory project, Panasonic has been tasked with manufacturing and supplying cylindrical lithium-ion cells and investing in the associated equipment, machinery, and other manufacturing tools. Tesla, meanwhile, will prepare, provide and manage the land, buildings and utilities. The Gigafactory is expected to produce 35GWh of cells and 50GWh of packs per year to be reassembled into commercial battery modules and packs by 2020.

This is not the first time that Panasonic and Tesla have collaborated. In 2010, the Panasonic factory in Suminoe, Japan began producing 3.1Ah battery cells for use in Tesla Roadsters, which were rolled out to Japanese consumers for the first time later that year. Elsewhere in Asia, the company entered the Chinese market for the first time in 2014, where it has partnered with China Unicom in the construction of electric charging stations.

The Gigafactory will be located near the city of Sparks, Nevada, after the state government offered Tesla tax incentives of up to $1.3 billion. The Gigafactory will directly employ about 6,500 people by 2020 according to a Tesla press release. Overall, Nevada looks set to gain an estimated 22,000 new jobs in total thanks to the factory.

UPDATE (July 27, 2016): The Gigafactory officially opened on July 26, 2016 and Panasonic's level of investment was reported at over $1.6 billion, significantly higher than the $979 million estimated when Panasonic's investment was first announced in late 2014.

Jonathan Gordon recently graduated from the University of Sydney and is a Research Intern at the East-West Center in Washington, D.C.