Panasonic Wants Tesla Gigafactory to Itself - Analyst Blog

Tesla Motors, Inc.'s TSLA Gigafactory might have Panasonic Corporation PCRFY as a partner and sole manufacturer of lithium-ion battery cells, according to the latter. However, other partners might supply raw materials to the factory.

Tesla will invest $2 billion in the factory, while the construction will require $4–$5 billion. The rest of the fund will be provided by Tesla's partners. Tesla is considering other potential investors, such as suppliers of raw materials for the investment. Panasonic does not have a time constraint to decide the amount and timing of the investment. However, it said that it will make investments gradually and that those till March will be small.

Panasonic and Tesla signed a deal in Oct 2013, under which Panasonic will increase the supply of battery cells to 2 billion in the 4-year timeframe till 2017. Panasonic has supplied 200 million cells to Tesla in the last 2 years.

In addition, Panasonic doubled its investment for auto batteries to 28 billion yen ($275 million) this year. Panasonic will utilize this additional investment to boost the domestic production of the small lithium-ion batteries for Tesla.

In February, Tesla announced the plans to construct the Gigafactory to produce lithium-ion batteries for its cars in collaboration with various partners. The automaker expects the factory to provide economies of scale and reduce production costs based on innovative manufacturing techniques, reduced logistic wastes, optimization of co-located processes and lower overhead costs.

Tesla will be initiating the construction work this year and expects to finish the factory by 2017. The factory will supply lithium-ion batteries to Tesla's assembly plant in Fremont, CA.

By 2020, Tesla expects the annual lithium-ion battery production of the Gigafactory to exceed the global production in 2013. The factory will produce enough battery packs to allow Tesla to build around 500,000 electric cars by 2020. Also, by the end of the first year of manufacture of the planned mass market vehicle, the per kWh cost of production of battery packs is expected to be reduced by over 30%.

Tesla currently carries a Zacks Rank #5 (Strong Sell). Some better-ranked automobile stocks worth considering are Tata Motors Ltd. TTM and Fuji Heavy Industries Ltd. (FUJHY). Tata Motors carries a Zacks Rank #1 (Strong Buy), while Fuji is a Zacks Rank #2 (Buy) stock.