South Korean media channels have reported that Japan’s Panasonic Corp. has turn over a sizable portion of its cylindrical battery supply to U.S. electric car maker Tesla Inc., as the joint venture of the two companies – Gigafactory 1 in the U.S. state of Nevada – encounters operational setbacks. As a result, warnings have emerged that the global market for cylindrical batteries is going to experience a supply shortfall that will persist to the middle of 2018.
According to South Korea’s ETnews and BusinessKorea, Tesla for several months has been trying to ramp up the production at Gigafactory 1, which is touted as a “super-size” plant for the manufacturing lithium-ion batteries. However, Tesla’s efforts have run into some serious challenges. The factory was set up in the remote desert area of Nevada with the intention that the entire facility would be powered by solar energy and other renewable energy sources. Unfortunately, power generation using solar energy has not as been as reliable as expected, and the difficulty of commuting has led to a shortage of manpower to get the factory fully operational.
Troubles at the Gigafactory have also impacted Panasonic, the main supplier of electric car batteries to Tesla and the joint investor in the Nevada plant. With Tesla experiencing a shortage of batteries for its vehicles, Panasonic is obliged to redirect much of its shipments of cylindrical lithium-ion battery cells to Tesla to temporarily address the supply gap. Since Panasonic is a major battery producer, other customers in the global battery market are now scrambling to secure alternative suppliers (e.g. Samsung SDI Co. Ltd. and LG Chem Ltd. in South Korea and Japan’s Murata Manufacturing Co. Ltd.).
Based on the reporting from media channels, Japanese battery dealers have also claimed that it is now almost impossible to obtain any new supply of cylindrical cells in their domestic market as Panasonic has halted the externals sales of these products. Furthermore, Samsung SDI and LG Chem are also having difficulty to fulfill the redirected orders from the Japanese dealers. Outside analyses have projected that additional supply of cylindrical cells will not be available until the middle of 2018.
Another indication that Tesla is seeing tightening battery supply is the US$33 million deal it signed with Samsung SDI on December 5. Under this deal, Samsung SDI will be providing cylindrical cells used in Tesla’s energy storage project in South Australia. Even though Panasonic previously enjoyed an exclusive partnership with Tesla, its batty cell supply appears to have been outpaced by Tesla’s surging demand.
(Photo credit: Tesla Inc.)