Toyota will control 51% of the new company and Panasonic will hold the remaining stake. The new venture will make lithium ion batteries, solid state batteries and develop other new technologies to meet fierce competition in a growing industry.
Panasonic's facilities in Japan and China will produce for the new company, but its U.S. factories will still manufacture for Tesla.
Toyota Executive Vice President Shigeki Terashi said: "We hope the new company helps us to achieve the sales goal of 5.5 million units of electrified vehicles in 2030."
Panasonic Senior Managing Executive Officer Masahisa Shibata pointed to synergies between the two companies: "We can evolve our batteries more speedily by making use of Toyota's technology."
Toyota and Panasonic reached an agreement to produce batteries for electric cars in December 2017. Both are deepening their cooperation as the drive to develop more effective batteries for electric vehicles heat up.