Tesla Motors Inc (NASDAQ:TSLA) announced on Wednesday that it signed an agreement with Panasonic Corporation (OTCMKTS:PCRFY) (TYO:6752) to boost battery production for its EVs. So is this agreement a positive or a negative for Tesla? It may be both, depending on how you look at it.

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Details on Tesla’s agreement with Panasonic

Tesla Motors Inc (NASDAQ:TSLA) made the revelation on Wednesday through a regulatory filing and a press release. Under the agreement, Panasonic will expand production for the battery cells which are the main part of the automaker’s battery packs. The agreement runs through 2017, and Panasonic Corporation (OTCMKTS:PCRFY) (TYO:6752) will support up to 2 billion cells over the next four years.

Tesla’s agreement as a positive

Deutsche Bank analysts Dan Galves, Rod Lache, Mike Levin and Patrick Nolan have a Buy rating and $200 per share price target on Tesla Motors Inc (NASDAQ:TSLA). They see the agreement as a positive. They estimate that every vehicle uses about 6,000 battery cells, so increasing production to 2 billion cells suggests that the automaker sees the potential to produce 330,000 vehicles over the next four years.

The Deutsche Bank team notes that Tesla isn’t planning to launch the Generation III vehicle until the middle of 2017, so these batteries will mostly be for the Model S  sedan and the Model X crossover vehicle. Their model suggests a volume of just 214,000 vehicles over the next four years. Of course demand will play a key role in how quickly Tesla Motors Inc (NASDAQ:TSLA) produces vehicles, but they see this announcement as a positive. They say it confirms that it will be possible for Tesla to ramp to over 80,000 vehicles a year, compared to about 23,000 this year.

The analysts also say that this agreement offers pricing visibility for Tesla for one of the most important components of its vehicles and suggests that the automaker is still seeing very strong demand. They believe the company is close to solidifying a deal with another battery maker, which would offer even greater flexibility and visibility as it works to ramp volumes past 2017.

This 330,000 number called to mind a report from Jefferies analysts back in July. They said at that time, that they doubted Tesla at $120 per share because their calculations said the automaker would have to sell more than 321,000 vehicles in 2020. Depending at what rate Tesla ramps production and whether it adds another battery maker, this number might not be too much of a stretch. But admittedly, there are several major question marks here.

Tesla’s agreement as a negative

Much of Wall Street appears to be taking the negative view of Tesla Motors Inc (NASDAQ:TSLA)’s announcement, however. Shares fell more than 3% on Wednesday and continued dropping in premarket trading this morning. Robert Weinstein of The Street presents the bearish argument for Tesla’s announcement. He touches on the fundamentals at first, comparing Tesla’s multiples with those of other automakers, just as most bears do. But the next part of his argument might be the most interesting.

He doesn’t think the new agreement goes nearly far enough and suggests that it limits Tesla’s vehicle output too much, particularly because of how quickly the automaker’s shares have appreciated. He thinks anything over a $100 per share price on Tesla is “an easy short,” noting that the automaker hasn’t reported a full year of profits yet. He also suggests that “the effective price” of Tesla’s vehicles “will rise dramatically” if the automaker can speed up production quickly, noting that the federal plug-in EV tax credit is capped at 200,000 vehicles per automaker, so as soon as Tesla Motors Inc (NASDAQ:TSLA) churns out its 200,000th vehicle, the effective sticker price of its cars rises by about 10%.

On the other hand, if Deutsche Bank analysts are right and Tesla is able to get better pricing on batteries by diversifying suppliers, then the deal might not be as bad as bears think. The answer to this question isn’t something we can judge at face value. Battery costs continue to be a major factor in just how much of the bullish model Tesla Motors Inc (NASDAQ:TSLA) can pull off.