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Tesla Says Panasonic Exclusive Supplier of Model 3 Batteries

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Tesla Motors, Inc. (TSLA - Free Report) announced that Panasonic Corporation (PCRFY - Free Report) will be exclusively supplying batteries for its mass market vehicle Model 3. Batteries for the higher-end Model S sedan and Model X SUV will also be supplied by Panasonic. The automaker also denied rumors that it is negotiating with Samsung SDI for the supply of batteries for its vehicles.

Earlier, media reports claimed that Samsung SDI was negotiating with Tesla for the supply of battery for its electric cars as well as energy storage systems. However, Tesla’s CEO denied any such developments.

According to earlier reports, Tesla’s development facility in California had received a shipment of 125 tons of Samsung SDI batteries. This led to rumors that Samsung may be supplying batteries for the Model 3 in the future. The batteries supplied by Samsung measure 65mm in height and 18mm in diameter. The battery is sufficient to generate enough power for a vehicle.

Meanwhile, Panasonic also partners Tesla in the construction of Gigafactory in Nevada. Tesla plans to produce the first cell at its Gigafactory in the fourth quarter of 2016. By 2020, the automaker expects the annual lithium-ion battery production of the Gigafactory to exceed the global production of 2013. The factory will produce enough battery packs to allow Tesla to build around 500,000 electric cars. Based on the rising demand for Model 3, Tesla plans to advance production of 500,000 total units (including Model S, Model X, and Model 3) to 2018, two years earlier than planned. It will also reduce the ‘per kWh’ cost of production of battery packs by over 30%.

Tesla is thus relying on Panasonic for the supply of its batteries. However, this is uncommon in the auto industry. Most automakers depend on multiple suppliers as this ensures flexibility and also helps to lower cost owing to competition.

Tesla currently carries a Zacks Rank #4 (Sell).

Stocks that Warrant a Look

Some well-ranked automobile stocks include Lear Corp. (LEA - Free Report) , and Superior Industries International, Inc. (SUP - Free Report) . Both the stocks sport a Zacks Rank #1 (Strong Buy).

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