Tesla And Panasonic Agree On Three-Year Battery Deal

Tesla Inc. TSLA has entered a three-year deal with Panasonic Corp. PCRFY under which the Japanese battery maker will manufacture and supply lithium-ion battery cells at Tesla’s Gigafactory in Nevada.

What Happened

The agreement was signed June 10, according to a Securities and Exchange Commission filing Tesla made Tuesday. 

The deal is effective from April 1, 2020, until March 31, 2023, and covers the terms of production capacity commitments by Panasonic and purchase volume commitments by Tesla over the first two years of the agreement.

Tesla's general terms and conditions of partnership with Panasonic have been amended.

The automaker has modified the term to expire 10 years after certain manufacturing milestones are achieved by Panasonic. 

Why It Matters

Last month Panasonic’s CFO, Hirokazu Umeda, said they were seeing “strong demand” for Tesla’s battery cells. Umeda signaled interest in expanding the Nevada factory.

Panasonic and Tesla’s relationship has been worsening over the past years and the automaker is moving towards making its own batteries. Their joint venture to manufacture solar roof tiles has already come to an end.

Chinese battery maker, Contemporary Amperex Technology Co. Ltd., is working with Tesla on creating a so-called million-mile battery, which can last as long as 16 years and 1.24 million miles.

Tesla Price Action

Tesla shares traded 0.32% lower at $979 in the after-hours session on Tuesday. The shares had closed the regular session 0.89% lower at $982.13. 

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