Tesla Motors Inc. signed a deal with Panasonic Corp. to start a joint battery venture, in which Tesla will invest up to $2 billion. Panasonic, which is the main supplier of lithium-ion cells for Tesla electric cars and owner of 1.1% share in the American company, did not disclose any financial terms of the deal.
Todays announcement, comes about five months after the negotiations between the two companies became public. Under the agreement, Panasonic will build cylindrical lithium-ion battery cells and invest in equipment, machinery and other tools, while Tesla will provide and manage land, buildings and utilities, both companies said today in a joint statement. The planned investment in the future Gigafactory for lithium-ion batteries could reach as much as $5 billion dollars, $2 billion of which will be provided by the American electric car manufacturer.
“Panasonic’s lithium-ion battery cells combine the required features for electric vehicles such as high capacity, durability and cost performance. And I believe that once we are able to manufacture lithium-ion battery cells at the Gigafactory, we will be able to accelerate the expansion of the electric vehicle market,” Panasonic Executive Vice President Yoshihiko Yamada said today, cited by Bloomberg.
Teslas Chairman and CEO, Elon Musk aims to double sales at its auto division to 500 000 in four years, which will transform Tesla into a mass-market carmaker. However, his plans are contingent on reducing the battery costs by as much as 30%, while some analysts argue that the new Gigafactory will not have enough scale to reduce costs by that percentage.
Panasonic, which already has an agreement to provide 2 billion cells for Teslas electric cars through 2017, is expected to be the lone battery maker working with Tesla. The Japanese company also announced that it will be more cautious about overspending as it remembers well the early 2000s, when the company was crushed by bad bets on Plasma displays. In order to avoid the same scenario, the Japanese battery manufacturer has compiled detailed risk scenarios and a variety of backup plans, in case demand for Teslas cars does not double in four years, as expected.
“If Tesla’s EVs do not sell in line with Tesla’s expectations, Panasonic may not be able to recoup its investment,” Masahiro Wakasugi, a Tokyo-based analyst at BNP Paribas, wrote in a July 10 report, cited by Bloomberg. “The negative impact, if the plan is not a success, would be considerable.”
Tesla Motors Inc. was 1.74% up to close at $228.92 per share yesterday in New York, giving the company a market capitalization of $28.41 billion. The shares of the company have gained 70.48% in the past twelve months. According to the Financial Times, the 12 analysts offering 12 month price targets for Tesla Motors Inc have a median target of $221.00, with a high estimate of $325.00 and a low estimate of $75.00. The median estimate represents a -3.46% decrease from the last price of $228.92.
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