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Panasonic to partner with Tesla to make car batteries in China

Tesla Model 3 cars are seen as Tesla holds an event at the factory handing over its first 30 Model 3 vehicles to employee buyers at the company's Fremont facility in California. Photo: Reuters

Japan's Panasonic is considering partnering with American electric-car manufacturer Tesla to produce car batteries in China, where the government has required domestic and global automakers to manufacture more new energy vehicles in a bid to combat air pollution.

During a group interview at the International Consumer Electronics Show in Las Vegas earlier this month, Panasonic President Kazuhiro Tsuga revealed that the two firms were studying the feasibility of building a super battery production facility in China, where Tesla is stepping up efforts to localize production, according to a report by the Nikkei Asian Review.

Tsuga did not give more details about when the China battery plant would be built.

The revelation of the car battery production plan came nearly three months after media reports said that Tesla was negotiating with the Shanghai municipal government to set up a wholly owned manufacturing factory in the city's free trade zone, in a sign of its deeper localization that would help reduce the production costs and transportation fees.

In China, Tesla cars are identified as ones with fancy exteriors and state-of-the-art technologies, but the high prices make them unaffordable for ordinary buyers, especially compared with the electric cars made by domestic automakers.

China's Securities Daily quoted some industry insiders as saying that establishing a car battery plant in China could help Panasonic and Tesla to grasp market share as soon as possible, as China has become the world's biggest electric car market.

Last year, the Chinese government announced its decision to gradually ban the production and sales of vehicles powered by fossil fuels in an effort to deliver on its promise to increase the share of non-fossil fuels as part of its primary energy consumption to about 20 percent by 2030 and peak greenhouse gas emissions by the same year. The country's Ministry of Industry and Information Technology also put forward a stringent quota proposal requiring that 8 percent of automakers' sales should come from battery-powered cars or plug-in hybrid vehicles in 2018, rising to 10 percent in 2019 and 12 percent in 2020.

The Chinese government's preference to the production and sales of new energy cars not only brings business opportunities to electric car producers, but also to battery makers, which are struggling to be part of the electric car industry chain.

As Tesla's unique lithium-ion battery technology provider, Panasonic joined the US electric car producer in 2016 to build a $5 billion Gigafactory battery plant in Nevada. Tesla said that the battery plant will produce 35 gigawatt-hours a year of lithium-ion battery cells by 2018, almost as much as the rest of the world's battery production combined.

Panasonic President Tsuga claimed during an interview that the production capacity of the planned China battery factory would be basically equal to that of the Nevada-based one.

Actually, rumors about Panasonic's plan to build a battery plant in China emerged in May 2017, when media reports said that the Japanese company was planning to spend hundreds of millions of dollars to establish a joint venture in eastern China's Jiangsu province.

On Tesla's part, the US electric car producer is improving its charging network in China, where it promised to comply with the Chinese national standards.

Earlier this month, Caixin, a leading business news provider in China, reported that Tesla intended to install an additional 1,000 Superchargers in China in 2018, as part of a strategy to promote sales in the country, where people are still reluctant to buy electric cars due to the limited mileage.

As of the end of 2017, 1,021 Superchargers went into operation in China, according to statistics from Tesla.

In November 2017, Tesla opened what it called the world's largest Supercharger station in the Chinese city of Shanghai, where as many as 50 cars can be charged simultaneously. Such massive charging stations will also be introduced in Beijing and the country's western regions, the company said recently.

However, there is a key problem that Tesla must solve now regardless of how fast it develops the charging network in China and even the world: lack of production capacity. Tesla has cut the production target of its new Model 3 sedan by half to 2,500 per week for the first quarter of 2018. The company is betting on the relatively cheap Model 3 sedan to win the hearts of Chinese consumers.

Panasonic President Tsuga confirmed the Model 3 production, saying that the deliveries of battery cells designed for the Model 3 cars would accordingly delayed.

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