Panasonic to build $4bn battery plant in Kansas to meet Tesla demand

Japan’s Panasonic plans to build a $4bn plant in Kansas to boost battery production in the US as it gambles on expanded sales of Tesla’s electric vehicles.

The Japanese group, the world’s third-largest producer of EV batteries behind CATL and LG Energy Solution, already jointly operates a $5bn gigafactory in Nevada with Tesla. Elon Musk’s electric carmaker opened its second electric vehicle factory in Texas in April.

Panasonic’s new plant in Kansas is expected to create about 4,000 jobs and include a facility for research in next-generation battery technology, according to Rahm Emanuel, US ambassador to Tokyo.

The move underscored Panasonic’s commitment to its bet on booming demand for Tesla’s electric vehicles, even as it attempts to find other carmakers to supply batteries.

Over the past year, Washington and Tokyo have agreed to collaborate on developing advanced chips and other sensitive technologies related to climate change and energy to bolster their economic security.

“Don’t underestimate the research component that goes with this facility,” said Emanuel, suggesting that there was a geopolitical rationale for countries with “like-minded rules” to work together in areas such as battery storage.

Panasonic said no decision had been made on the research component of the Kansas plant.

In recent years, the company has refrained from making aggressive investments as its relationship with Tesla has evolved.

While Panasonic used to be Tesla’s exclusive supplier, the US carmaker recently began developing its own batteries and entered partnerships with South Korea’s LG Energy Solution and China’s CATL to support expanding sales of its vehicles. Meanwhile, the Japanese group has sought to reduce its dependence on Tesla by finding other clients.

Panasonic Energy, the Japanese conglomerate’s battery unit, said on Thursday that it had won approval to receive incentives from Kansas to build the plant.

US officials said Kansas had competed with Oklahoma for the new facility. Panasonic said its decision was based on “a holistic consideration of incentives, workforce and other factors”.

“With the increased electrification of the automotive market, expanding battery production in the US is critical to help meet demand,” Kazuo Tadanobu, chief executive of Panasonic Energy, said in a statement.

Tadanobu told investors in June that the company planned to triple or quadruple EV battery production capacity by 2028, boosting its output mainly in North America. Panasonic Energy, which has production facilities in the US and Japan, currently has the capacity to produce almost 50 gigawatt hours per year.

Panasonic is developing the next-generation EV battery called 4680 and plans to mass produce the new batteries from next year. The battery in development has five times more energy capacity than current devices.

Panasonic has been slower in building out its capacity compared with its Asian rivals. Its $2bn investment in Tesla’s gigafactory in Nevada only started to pay off in the fiscal year ended in March 2021.

The company mostly supplies Tesla but it also established a separate battery venture with Toyota in 2020. It said in April that it would invest ¥600bn ($4.8bn) in growth areas over the next three years, two-thirds of which will be earmarked for EV batteries and other areas.