The California battery-car start-up, Tesla Motors, is hoping a new deal with the electronics giant, Panasonic, will help quell lingering concerns about its long-term viability.
The market seems to agree, Tesla shares jumping 14% after word of the deal, which makes the Japanese company, a major battery supplier, its third-largest shareholder. Tesla stock opens Friday at$24.90, the highest level since the company first went public last June.
Panasonic’s purchase of 1.42 million shares follows the move, earlier this year, by Toyota to invest $50 million in the California-based battery car maker. Panasonic is a key partner in Toyota’s own battery car program.
The latest announcement is “a powerful endorsement of our technology,” said Tesla CEO Elon Musk, an Internet pioneer who is also active in the commercialization of spaceflight. “We believe the partnership with them will enable us to further improve our battery pack while reducing cost.”
The partnership is likely to move quickly, sources indicate, as has the alliance between Tesla and Toyota. At the upcoming Los Angeles Auto Show, Toyota plans to unveil a prototype of the RAV4-EV, a battery-powered crossover/utility vehicle that was developed in close cooperation with Tesla. A Panasonic battery pack is likely to be used in the production version, which is scheduled to reach market in 2012.
So far, Tesla has produced only one product of its own, the low-volume Roadster, a $109,000 2-seat sports car. It is planning to launch the more mainstream 7-seat Model S sedan about the same time as the RAV4-EV, for $57,400.
Panasonic’s investment – underscored by Musk’s comments — suggest Tesla is taking a close look at its current battery strategy. The maker has until now opted for the use of laptop computer-style cylindrical batteries. The advantage is their ready availability, but their shape limits design flexibility and also requires some complex wiring – each of the roughly 6,800 batteries in the Roadster pack must be triple-fused to prevent fires and shorts.
In contrast, the 2011 Nissan Leaf uses only a couple hundred prismatic lithium-ion battery cells, a variation of the technology that allows for a smaller, more flexible design that can be modified more easily to minimize intrusion, for example, into a vehicle’s passenger and cargo space.
Tesla and Panasonic have agreed to develop more advanced batteries, which could show up in the Model S or a third vehicle the California maker claims to have under development. Tesla is hoping to not only drive down the cost of its batteries but also improve their energy density. That could translate into smaller packs – or more extensive range. The company has talked about offering buyers of the Model S the choice of 100-mile range – like Nissan’s Leaf, or the option of buying longer-range battery packs.
But a spokesman for Tesla emphasized that while Panasonic now becomes its “preferred” battery supplier, it is still free to turn elsewhere if it finds better, or cheaper technology.
Panasonic’s stock purchase – which was priced at $21.15 a share – is just the latest in a series of investments by big-name partners. Along with Toyota, Tesla has allied with Daimler AG. The German maker has turned to the California start-up for help in producing the battery-powered version of its Smart fortwo, the Smart ED, and they are working together on various projects that could eventually roll into Daimler’s Mercedes-Benz showroom.
Tesla’s June IPO and subsequent alliances come as personally good news for Musk, who has staked his reputation – and a chunk of the fortune he made as a founder of PayPal – on the company, based in California’s Silicon Valley. Going through a bitter divorce, Musk earlier this year told the courts he had run out of money, though he since earned millions selling off some of his holdings in Tesla.
After an initial run-up, briefly surging as high as $30 a share in midday trading, Tesla numbers had settled back closer to the initial IPO price, analysts repeatedly raising concerns about the company’s ability to make the transition from building limited-volume sports cars to something like the Model S. Production will take place at an old Toyota plant near San Francisco that Tesla bought earlier this year.