Panasonic (PCRFY) will be investing over $100 million in Tesla's (TSLA -1.72%) Gigafactory 1 plant in Nevada to boost battery production capacity by 10% to 39 gigawatt-hours (GWh) per year.

The factory is part of Tesla's critical infrastructure producing electric motors and battery packs for the Model 3 and Model Y electric vehicles. While both companies have wanted to boost production for some time, their relationship has at times been strained, though higher Tesla sales seems to have cleared that up.

A Tesla Model 3

Image source: Tesla.

On the road to expansion

According to Nikkei Asian Review, Panasonic will add one more production line to the 13 already operating at the factory, which currently produces 35 GWh of lithium-ion battery cells per year.

The two companies have wanted to boost production to as high as 54 GWh annually, but in April 2019, Panasonic said it first wanted to see if demand for electric vehicles warranted new investments.

Tesla is Panasonic's largest battery cell customer, but it also acquired Maxwell Technologies last year to help make more efficient batteries, and CEO Elon Musk rankled Panasonic by tweeting Model 3 production was being held up by constraints in its partner's battery output.

A recent Science Channel video indicated the Gigafactory was producing 13 million lithium-ion battery cells a day, which suggests 80 gigawatt hours a year, but Panasonic denies it's producing so much and Musk's earlier tweet would also suggest otherwise.

Panasonic invested $1.6 billion in the advanced battery factory for it to achieve the 35 GWh of battery cell production capacity. With Tesla now on track to produce 1 million electric vehicles or more a year next year, boosting battery production at Gigafactory 1 now makes sense.