Panasonic will reportedly increase production of Tesla’s 2170 battery cells at Gigafactory Nevada over the next two years by 10%. The decision to increase production comes as Tesla puts pressure on Panasonic to meet its increasing demand for EV batteries.
According to a report from Nikkei Asia, citing an executive at Panasonic, Tesla recently informed the electronics giant that it would purchase as many batteries as they can produce. As a result, Panasonic will set up a 15th production line at Gigafactory Nevada within the next one to two years, according to sources familiar with the matter. This additional line is expected to boost the annual production capacity of the facility by around 10% from the current 38 gigawatt-hours (GWh) to 39 GWh.
This capacity increase will support approximately 500,000 to 700,000 Tesla Model 3 vehicles. Although the factory is already operating at full capacity, the Panasonic executive said they can squeeze in one more production line to meet Tesla’s demand.
One factor driving Tesla’s increased demand for batteries is the introduction of new U.S. tax credits that incentivizes domestic EV and battery production. The Inflation Reduction Act (IRA) offers tax credits of $35 per kilowatt-hour of battery cells manufactured in the US.
With the agreement to increase production at Giga Nevada, Panasonic will also be adjusting its plans for their upcoming battery factory in Kansas, which was initially focused on developing Tesla’s new 4680 battery. Instead the company now intends to manufacture the 2170 cells.
“We were concentrating on Kansas and developing the new  battery, but the IRA turned the tide. Tesla started saying to prioritize batteries that we can quickly increase in quantity,” the unnamed executive was quoted as saying.
Just last week Tesla announced that all Model 3 variants now qualify for the full $7,500 tax credit in the US. Previously two of the variants, the Rear-Wheel Drive (RWD) and Long Range Model 3, only qualified for half of the incentive ($3,750) due to its battery packs being assembled in China. With the increased tax credit the Model 3 RWD can be purchased for around $30,000 or less when combined with state-level incentives.