Tesla Motors recently announced a partnership on solar parts production with its key battery pack partner Panasonic. If a Tesla merger with SolarCity wins investor approval next month, the Japanese company will turn into its main supplier for photovoltaic cells and modules.
Tesla unveiled the plans in a blog post on Sunday. According to the agreement, Panasonic will start to manufacture modules and photovoltaic cells for Tesla’s solar panels in Buffalo, New York. The city is currently the location SolarCity has picked for the largest solar panel factory in the U.S.
However, SolarCity shareholders need to approve the merger deal with Tesla on Nov. 17 first. If the deal moves forward, Panasonic would start production in mid-2017.
The New Partnership
Tesla explained the new devices will make up a solar energy system that will power the company’s stationary electricity storage units, i.e. the Powerwall and Powerpack. Tesla’s chief technical officer, JB Straubel, expressed the company’s excitement at the opportunity to expand its business ties with Panasonic.
According to Straubel, the new partnership will lead to better batteries and faster production at reasonable costs. In short, Panasonic will run SolarCity’s Buffalo plant along with Tesla after the merger.
In return, the electric vehicle maker will buy battery cells from the Japanese electronics industry giant. However, it is yet unclear whether Panasonic would acquire the factory when it is ready. Also, the companies declined to be more specific on the financial terms of the deal.
Panasonic’s Shuuji Okayama, who runs the company’s Eco Solutions division, agreed to comment on the deal. He confirmed that the new contract could further deepen the two companies’ business relationship.
In recent years, Tesla has seen its relationship with the electronics giant grow, and Panasonic is currently its main supplier of lithium-ion cells for electric cars. Plus, Panasonic has directed plenty of funds to the construction of Tesla’s monster Gigafactory in Nevada.
Tesla’s Grand Plans
Tesla has plans to turn the $5 billion Gigafactory into the planet’s largest battery plant. In addition, the $900 million Buffalo facility is expected to be the largest solar panel plant in North America. Under the Tesla-Panasonic agreement, Panasonic will produce 10,000 units every day and employ 1,460 people. New York regulators have granted $750 million in incentives for the project.
SolarCity had to delay the grand opening of the plant to mid-2017 because of lack of funds. The merger with Tesla will amount to $2.6 billion, but SolarCity’s investors have mixed feelings about it.
Yet, Tesla Motors founder and CEO Elon Musk, who also chairs SolarCity’s board, described the merger as a “significant synergy.” But analysts cautioned that merging two businesses that are equally cash-intensive could cut deep into Tesla’s profitability in the short run.
To persuade shareholders, the EV maker promised to unveil a new solar roof product on Oct. 28. The mystery product combined with the Powerwall 2.0 will showcase what types of products Tesla-SolarCity could produce. Also, on Nov. 1, Tesla will release updated financial information on the merger.
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