Yesterday, Tesla Motors Inc (NASDAQ:TSLA) entered into an agreement with Panasonic Corporation (OTCMKTS:PCRFY) (TYO:6752) for the supply of cells for its electric vehicles, which may fetch the electronic giant $7 billion in revenues, says a report from Bloomberg.  As per the agreement, Panasonic will supply 2 billion lithium-ion batteries used in electric cars to the Palo Alto-based company in four years through 2017.

Tesla Motors

Deal to cement Panasonic’s dominance

Ali Izadi-Najafabadi, a Bloomberg New Energy Finance analyst, believes that the company will generate a sale of around $7 billion from its contact of supplying Model S and Model X batteries. The contract will also establish the company’s position as the largest supplier for electric cars, believes the analyst.

A spokesperson from Panasonic Corporation (OTCMKTS:PCRFY) (TYO:6752) told Bloomberg over a telephone interview that the Osaka-based company is considering shifting workers from the personal computer and mobile phone divisions into developing rechargeable batteries for cars.

Another spokeswoman said that the in last two years the company has shipped 200 million units to Tesla Motors Inc (NASDAQ:TSLA).

Panasonic batteries a key driver for Model S success

At the time of the announcement of the deal, CEO Elon Musk commented that Panasonic Corp cylindrical battery cells have been an important catalyst for the success of Tesla Motors Inc. He said that the Model S’s 265 mile range would not have been possible without the inclusion of high performance batteries. Musk also said “We look forward to strengthening our relationship with Panasonic, and I’m confident that this partnership will continue to be an integral part of Tesla’s success for years to come.”

Tesla Motors Inc (NASDAQ:TSLA) is expecting to sell 21,000 Model S sedans in the present year,  each carrying a price tag in the range of $70,000 to more than $100,000. The Model X sport-utility vehicle is slated to be released in late 2014.

Tesla may still look for more suppliers

Tesla Motors Inc (NASDAQ:TSLA)’s agreement with Panasonic Corporation (OTCMKTS:PCRFY) (TYO:6752) hasn’t wiped out the possibility of Tesla getting batteries from other battery suppliers. The electric car maker wants to increase its supply chain to enhance the competition among suppliers. The company has recently added Samsung Electronics Corporation to its list of suppliers. The company is also believed to be in talks with LG Electronics Inc.

At the midday break in Tokyo trading, shares of the biggest supplier of lithium-ion batteries climbed 3.5% to 982 yen, which is the closest to their record high since July 2011. Year to date the stock is up over 88% profit compared to 40% year to date increase for benchmark Topix index.