The agreement supplies Tesla with Panasonic's lithium-ion battery cells to build more than 80,000 vehicles over the next four years. It guarantees the availability of enough cells in 2012 to meet Tesla's aggressive production ramp-up and fulfilment of more than 6,000 existing Model S reservations. This supply agreement helps ensure Tesla will meet its cost and margin targets for the Model S.

This agreement builds upon a multi-year collaboration between Panasonic and Tesla to develop next-generation automotive-grade battery cells and accelerate the market expansion of electric vehicles. In 2009, Panasonic and Tesla initially entered into a supply agreement. In 2010, Panasonic invested $30m in Tesla to deepen the partnership and foster the growth of the electric vehicle industry.

Panasonic supplies cells with the highest energy density using its nickel-type cathode technology. Panasonic and Tesla together have developed a next-generation battery cell based on this nickel chemistry, optimised specifically to enhance an electric vehicle’s quality and lifespan.

Elon Musk, Tesla Co-Founder and chief executive officer, said: ‘It’s a powerful endorsement of our technology that Panasonic, has chosen to partner with Tesla to advance electric vehicle performance and value. Incorporating Panasonic's next-generation cells into Model S batteries will ensure unrivalled range and performance. We are very grateful for our great partnership with Panasonic.’

Masato Ito, president, Panasonic Corporation’s Energy Division, said: ‘Panasonic will supply lithium ion cells for EVs that can achieve longer range with large energy density. It is our pleasure to start supplying the cells for Tesla's Model S and promote sustainable mobility.’