Panasonic invests extra $100 million at Reno Gigafactory.

The investment will add a new 14th battery production line and ramp up production capacity by 10% at Reno Gigafactory.
Panasonic is supercharging its efforts at Tesla's Reno Gigafactory with a major expansion of its operations, including investment in new infrastructure for making higher-capacity batteries with lower costs.

"There's some construction work that needs to take place over the next couple of months," Carl Walton, vice president of production engineering and facilities for Panasonic Energy of North America, confirmed. "Then early next year, we'll be installing new equipment with production starting shortly after that."

Additional capacity will come from a 14th production line that Panasonic is adding to the Gigafactory. The new line is expected to significantly boost capacity at the site, which is at 35 gigawatt hours per year prior to the expansion.

Panasonic also plans to hire more employees. The Gigafactory employs about 7,000 workers, with Panasonic and Tesla accounting for the bulk of workers.

"The EV market throughout the world continues to explode and the demand is there," Walton said. "This is our way of helping our partner (Tesla) to continue supplying electric vehicles to the market."

Panasonic's expansion plans are not limited to adding a production line. The expansion will also be accompanied by upgrades to its existing facilities at the Gigafactory.

The upgrades are necessary in order to accommodate Panasonic's new battery technology. The new battery technology checks off two boxes mentioned by Musk when talking about increased adoption of electric vehicles: battery capacity and cost. 

Range and improved affordability are especially crucial when it comes to competing against traditional gas-powered vehicles, making them essential for boosting EV adoption. 

Panasonic's latest battery improves energy density by 5% from its previous battery. Panasonic also claims that it is 1.4 times denser than competing iron phosphate batteries, which would make it the world's highest density battery. The company's goal is to eventually increase the energy density of its batteries by 20%.

Panasonic's new technology will also lower battery costs by further reducing the amount of cobalt - one of the primary drivers of battery cost. The company claims its previous battery was already using half the amount of cobalt used by its competitors and its latest technology puts Panasonic one step closer to its goal of producing cobalt-free batteries.

Panasonic posted its first quarterly profit at the Gigafactory at the end of last year, which it then followed up with a second straight profitable quarter at the beginning of this year.

Then came COVID-19.  The pandemic led Panasonic and Tesla to temporarily cease operations at the Gigafactory.

"The novel coronavirus has certainly impacted performance from the middle of March to early May, but since June the business is turning a profit," the company said. "We hope to recover for the year and turn a profit for the full fiscal year."

COVID-19 especially presents a challenge for sectors such as manufacturing, Walton said. While some businesses can continue operating virtually through online tools such as Zoom video conferencing, Panasonic only has a few employees that are able to work remotely.

At the same time, advanced manufacturing facilities such as the Gigafactory are better positioned to incorporate the safety measures required by COVID-19, according to Walton.

"Part of our production environment has always been clean environments because of the batteries," Walton said. "We now observe social distancing and we also have stringent safety protocols in place so this is kind of a new normal for us."

Walton, however, does not foresee any additional adverse impacts from COVID-19 on Panasonic's Gigafactory operations. Instead, the biggest anchor on profitability is expected to come from the high cost of expanding operations and upgrading existing facilities, which is necessary for even more future growth. A report from Nikkei Asian Review pegs the investment at more than $100 million.

Panasonic, however, also expects EV adoption to continue to see an increase, especially once the global economy bounces back from the pandemic.
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