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Panasonic Backs Tesla's Gigafactory, Investing $1.6 Billion

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On Monday, it has come to light that Japanese electronics company Panasonic (PCRFY - Free Report) has agreed to invest up to $1.6 billion in electric car company Tesla’s (TSLA - Free Report) Gigafactory, a huge lithium-ion battery manufacturing plant (for more information on the Gigafactory, read “So, What Actually Is Tesla’s Gigafactory?”).

According to MarketWatch, Kazuhiro Tsuga, President of Panasonic, said that "We are sort of waiting on the demand from Tesla. If Tesla succeeds and the electric vehicle becomes mainstream, the world will be changed and we will have lots of opportunity to grow."

Tesla, however, is not alone anymore in producing electric vehicles and the batteries that power them. General Motors (GM - Free Report) has partnered with Korean electronics company LG to produce lithium-ion car batteries, and Faraday Future, an electric car manufacturer based in California, has teamed up with Chinese tech company Letv to build a $1 billion lithium-ion battery facility. Both of these partnerships pose a serious threat to Tesla’s domination of the electric vehicle market.

However, all of these companies will need to figure out a way to produce affordable electric cars and lithium-ion batteries. Tesla is planning on launching its relatively low-cost Model 3 soon, and its Gigafactory plays an important role in cutting costs.The $5 billion factory is expected to reach full production capacity by 2020, and will eventually lower battery production costs by 30%.

Panasonic expects sales related to smart car technology to nearly double by 2019, representing 25% of the company's total revenue, up from today's 15%.

To date,Tesla and Panasonic are the sole investors in the Nevada-based plant. Tesla has also entered conditional agreements with Pure Energy Minerals, Bacarona Minerals, and Rare Earth Minerals to acquire lithium hydroxide for the Gigafactory.

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