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Panasonic to build prototypes of new Tesla battery in 2021

Japanese manufacturer eyes production deal despite carmaker's in-house plans

A Tesla service center in Costa Mesa, California.   © Reuters

OSAKA -- Panasonic will begin production as early as next year of prototypes of a new, cheaper type of battery for Tesla electric vehicles.

The cylindrical cell, plans for which were announced in September by Tesla CEO Elon Musk, was developed in-house by Panasonic at Tesla's request. It is larger than the automaker's current batteries, at 4.6 cm in diameter and 8 cm long, and also uses different materials. The new design costs less than half as much per kilowatt-hour, according to Tesla.

Panasonic will set up a prototype production line at existing facilities. The cost of the project is expected to run into the tens of millions of dollars.

Though Tesla plans to make the new cell itself, battery industry watchers expect it will be difficult for the automaker to handle all of the production on its own. Panasonic will seek a future partnership to take on some of the manufacturing.

Panasonic recorded 473.5 billion yen ($4.57 billion) in sales from its automotive battery business for the fiscal year ended March 31, with Tesla as its main customer. The company plans to expand capacity by 10% in 2021 at a U.S. plant it operates with Tesla in Nevada and is considering a new factory in Europe.

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