Tesla To Pay Panasonic $1.7 Billion For Gigafactory-Related Deal

Tesla Panasonic

NOV 6 2016 BY STEVEN LOVEDAY 7

Tesla Gigafactory

Tesla Gigafactory

Tesla Motors, as part of its battery and Gigafactory partnership with Panasonic, has to shell out around $1.7 billion to the company for battery cells made at the factory. This was as of September 30th. October filings by Tesla prove that this number was, in fact, spot on with initial agreements.

Panasonic Stand Featuring A Tesla Model X

Panasonic Stand Featuring A Tesla Model X

The key word here, however, is partnership. Panasonic will also be bringing up to $1.6 billion for the project to the table as well.

Panasonic┬ádialed down its annual profit projections late last month after beginning to bring forth some of its share of the monies last week. Huge demand for the Tesla Model 3, and marked production, sales, and profit are keeping Panasonic’s commitment and contribution strong.

The two companies joined forces back in 2014, and aside from each partner’s monetary investment, Panasonic furnished the necessary machinery and equipment used to produce the battery cells. Tesla plans to be making the batteries (21-70s) at the Gigafactory, prior to the end of this year. The first round of batteries are slated for Tesla’s energy products, with subsequent battery production for use in Tesla vehicles.┬áTesla’s original press release stated:

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. A network of supplier partners is planned to produce the required precursor materials. Tesla will take the cells and other components to assemble battery modules and packs. To meet the projected demand for cells, Tesla will continue to purchase battery cells produced in Panasonic’s factories in Japan.

Chief Technical Officer and Co-founder of Tesla Motors, J.B. Straubel explained:

“The Gigafactory represents a fundamental change in the way large scale battery production can be realized. Not only does the Gigafactory enable capacity needed for the Model 3 but it sets the path for a dramatic reduction in the cost of energy storage across a broad range of applications.”

Source: Reuters

Categories: Tesla

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7 Comments on "Tesla To Pay Panasonic $1.7 Billion For Gigafactory-Related Deal"

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Hopefully that doesn’t impact the Tesla cash position.

Good thing that interest rate is low right now.

Did I understand this correctly that all the cells are going to be made in Japan? So no cells are going to produced Nevada? Are they going to just be using the gigafactory to put them into battery packs to be sent to Fremont?

“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.”

As I read it, they will be producing cells in NV as well as purchasing Japan made cells to keep up with demand.

Cells are definitely going to be made in Nevada, in crazy quantities.

It’s just that they are going to be made in Nevada by Panasonic, which is a kind of tenant in the Gigafactory.

Tesla will take deliveries of the cells from Panasonic, right at the factory, and produce packs and stationary storage modules on the Tesla side of the factory.

Panasonic is not building a turnkey battery factory for Tesla’s operation; they are going to run the cell side of the factory themselves.
The arrangement between them is probably complicated: Tesla buys cells, Panasonic pays some kind of “rent”, but Tesla probably credits Panasonic under some line item or other. There are probably tax and other implications so I would not be surprised if it took an accountant to fully understand how the partnership is structured.

To get to the current level of cell production Panasonic had to make certain investments. I believe they reopened an old factory, and the total investment was something in the order of a couple of hundred million dollars. And because they didn’t want write off that investment in 2 or 3 years they probably made a deal with Tesla for a longer period. If Tesla had chosen to use prismatic cells instead of cylindrical cells this might not have been necessary. Apart from the investment part this just my guess.

OFF TOPC….. I think a Hyperloop in needed between the Gigafactory and the Freemont plant.

I fail to see why this is news. Panasonic ponies up $1.7B investment in Gigafactory, and Tesla, in exchange for not having to front all of the cash itself, agrees to buy some batteries. Or should I say, agrees to commit a portion of future sales back to Panasonic?

With 300,000 pre-orders for Model 3, if Tesla made NO OTHER battery purchases (for Model S, for Model X, for additional years of Model 3 production, for PowerWalls, for PowerCubes, for future products…) that would be $5,667 per pre-ordered Model 3. That sounds like less than those batteries will be exchanged for, so Tesla really has not stuck it’s head out at all making such a commitment. The dollars there is just not an issue. They need to get batteries for Model 3 from somewhere, and they’ll spend that much money anyway.