Could Apple Replace Panasonic As a Strategic Partner in Tesla Motors' Gigafactory?

Panasonic hasn't fully committed to invest in Tesla Motors' Gigafactory, which could leave the door open for a strategic partnership between Tesla and Apple.

Apr 5, 2014 at 11:33AM

Investors pushed shares of Tesla Motors (NASDAQ:TSLA) lower by more than 2% on Monday, following news that Panasonic had not fully committed to partnering with the automaker on its planned Gigafactory. This could be a serious setback for the electric-car maker. "Having Panasonic as a joint venture partner would facilitate strategic access to Panasonic's supply chain and reduce risks," wrote an analyst at Wedbush Securities. Not to mention, Tesla needs partners to help front a portion of the cost of building the biggest lithium-ion battery plant on the planet.

Here's a quick recap of where the project currently stands. Last month, Tesla announced plans to build a $4 billion-$5 billion factory that would be capable of producing more lithium-ion batteries in a single year than are currently produced worldwide. On top of this, the electric-car maker says this Gigafactory would lower the cost of its battery packs by as much as 30%.

Screen Shot

Source: Tesla Motors

Tesla is investing $2 billion in the project from cash it raised through a convertible debt offering last month. But it still needs partners to put up the remaining funds. Tesla had initially suggested that its supply partner, Panasonic, was participating in the deal. But we now know that Panasonic's involvement is anything but certain.

Battery-powered ambitions
The Japan-based company's president, Kazuhiro Tsuga, recently told Bloomberg that Tesla's Gigafactory presented considerable investment risks. Specifically, he said, "Elon plans to produce more affordable models besides Model S, and I understand his thinking and would like to cooperate as much as we can. But the investment risk is definitely larger," according to Bloomberg. This creates a lot of uncertainty about Tesla's planned Gigafactory.

But it might also create an opportune entry point for Apple (NASDAQ:AAPL) in the deal. After all, the prospect of such a large-scale manufacturing facility is exciting, not only for Tesla but also for a number of other companies, such as Apple, whose consumer electronics products rely on lithium-ion cells. While this is purely speculative at this point, Tesla's CEO, Elon Musk, met with Apple's chief of mergers and acquisitions last spring.

The San Francisco Chronicle broke the story about their meeting last month and caused a firestorm of rumors that Apple was looking to acquire the electric-car maker. But perhaps a more likely scenario would be Apple's involvement in Tesla's Gigafactory. Apple holds valuable battery patents that could be interesting to Tesla down the road, including a new smart power-management system that aims to extend an iPhone's battery life by learning users' habits.

Additionally, Apple "could use the batteries to augment its huge solar installations at its data centers or factories" suggests Seth Weintraub of 9To5Mac. Still, Apple's involvement in Tesla's Gigafactory might not be so simple -- particularly because Apple's products use a different size battery than Tesla's, which uses 18650 cells. Musk emphasizes this issue in a Q&A forum with an Apple iPhone engineer, in which he says the 18650 format is around 18 millimeters in diameter, which would be too thick for use in something such as a MacBook Air or iPhone.

A more reliable "Giga" partner
While Apple's potential involvement in Tesla's Gigafactory remains to be seen, there is one joint-venture partner that we can almost certainly count on: SolarCity (NASDAQ:SCTY). Musk has already said that the Gigafactory will be both solar and wind powered, thereby making the plant both green and self-sustainable to some extent, therefore making SolarCity an obvious fit for the undertaking.

Not to mention, Tesla and SolarCity currently work together on other ventures. SolarCity, for example, provides the solar panels used to power Tesla's Supercharger stations throughout the world. Meanwhile, similar to Apple and Tesla, SolarCity relies on lithium-ion batteries to power its new solar-energy-storage systems. There's also the family factor. You see, Musk is the cousin of SolarCity's CEO, Lyndon Rive, and a majority shareholder in the company.

Screen Shot

Source: Tesla Motors

As a result, it seems as though SolarCity is the only sure partner at this point. Nonetheless, there could be a chance that Apple will get involved in the Gigafactory -- especially now that Panasonic seems to be getting cold feet. Either way, Tesla will need to nail down its partners within the next couple of months if it plans to begin construction of the factory by year's end.

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Tamara Rutter owns shares of Apple and Tesla Motors. The Motley Fool recommends Apple, SolarCity, and Tesla Motors. The Motley Fool owns shares of Apple, SolarCity, and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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