October 30, 2013 / 2:04 PM / 5 years ago

Carmaker Tesla to step up supply of battery cells from Panasonic

TOKYO (Reuters) - Tesla Motors Inc (TSLA.O) will sharply increase the number of lithium ion battery cells it receives from Japan’s Panasonic Corp (6752.T), in a deal that underscores the U.S. carmaker’s confidence in the future of all-electric cars.

Tesla Motors Inc demonstrates its new battery swapping program in Hawthorne, California June 20, 2013. REUTERS/Lucy Nicholson

Electronics maker Panasonic, already Tesla’s primary supplier of lithium-ion batteries, will provide nearly 2 billion lithium ion cells to the carmaker in the four years to 2017, the two companies said on Wednesday.

That is a big step-up from the 200 million cells Panasonic is expected to have supplied to Tesla in the two years ending this December.

The deal shows Tesla’s faith in its models despite slower-than-expected global sales of electric vehicles.

Panasonic’s cells will power both the Model S and the new Model X which is set to go into production by the end of 2014, the companies said.

However the deal does not mean that the carmaker has ruled out other suppliers.

Tesla officials believe the company needs to diversify its supply chain to foster competition among makers of key components and to ensure Tesla has a stable supply of parts.

“Tesla is in talks with Samsung, LG, and other manufacturers, and will continue to discuss future supply with them and to evaluate their technology,” spokeswoman Atsuko Doi said.

Both Samsung (005930.KS) and LG Chem Ltd (051910.KS) have manufactured lithium ion cells for Tesla’s Roadster sports car. The carmaker manufactured 2,500 Roadster vehicles.

Panasonic plans to build an additional production line for small batteries at a facility in the Osaka area in western Japan, and re-start another line at a separate Osaka plant to meet demand.

(This version of the story corrects the company name and RIC in second to last paragraph to LG Chem Ltd from LG Electronics.)

Reporting by Yoko Kubota and Norihiko Shirouzu; Editing by Pravin Char

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