The new battery is expected to give the vehicles one of the world’s longest ranges per kilowatt-hour, on par with those developed by other Asian makers. Given that EVs will be able to travel farther on a single charge, Panasonic expects the shift to EVs will accelerate and is investing heavily in the development of such batteries.

Tesla says its current flagship Model S has a range of about 650km on a single charge. With the new battery, its range will improve to around 750km. This is close to Mercedes-Benz’s flagship EQS which can travel around 770km on a single charge.

One of the hurdles for slow EV penetration is their short ranges, which means that drivers will have to stop to charge constantly. Panasonic began developing the new 4680 battery cells on request from Tesla, which had plans to produce those batteries itself, although it is unclear if those plans extend to mass production.

CEO Elon Musk says the company wants to make its own batteries to supplement supply and that Tesla will continue to procure batteries from Panasonic or other battery manufacturers. Batteries make up 30% of the total cost of each EV.

The new battery will be twice as big as older versions, with a fivefold increase in capacity. This will allow car manufacturers to cut down on the number of batteries used in each car, which will also reduce the time taken to fit them in the vehicles.

Given its high efficiency, it will cost 10% to 20% less to produce these new batteries, compared with older versions on the basis of capacity.

But Mercedes plans to start mass production of a new model this year that can travel 1,000km on a single charge using batteries made by China’s CATL, as the global development race for safer, cheaper, and long-life batteries intensifies.

Panasonic is expanding its plant in Wakayama prefecture and bringing in new equipment to mass produce the new Tesla batteries, with a fresh investment of around ¥80 billion (US$704 million).

It already has EV battery plants in Japan and US and supplies batteries to EV plants operated by Tesla in California.

The Wakayama factory’s annual production capacity is still under discussion, but it is expected to be around 10 gigawatts per year which is equivalent to 150,000 EVs. This is around 20% of Panasonic’s production capacity.

Panasonic plans to partially start operations this year to establish safe, efficient techniques before beginning mass production next year. The company has plans to expand mass production in plants in the US or other countries.

Apart from Tesla and Mercedes, other carmakers and battery makers are also rushing into the sector.

CATL has also announced a series of investment plans, with a total investment amount of close to ¥2 trillion. LG Chem has raised around ¥1 trillion by listing its affiliated company and plans to use the proceeds to invest in the US Toyota Motor plans to invest ¥2 trillion in battery production and development by 2030.

While all-solid-state batteries are lauded as safer next-generation batteries, it is expected to take time before the version becomes commonly used. Panasonic is aiming to make its new lithium-iron battery “the new global standard in EVs” and wants to supply to other carmakers too.

Thanks to demand from Tesla, Panasonic once had a big chunk of the EV battery market. However, CATL and LG Chem in 2019 started supplying batteries to the Tesla plant in China, causing Panasonic to lose market share, which it is now trying to claw back through development of the new battery.