Tesla Motors Inc (NASDAQ:TSLA) has entered a deal with Japan’s Panasonic Corporation (OTCMKTS:PCRFY) (TYO:6752) to enhance the supply of lithium-ion battery cells. The electric carmaker said Wednesday that the deal is a crucial part of its plans to increase production of its current and future vehicles. It shows Tesla Motors Inc (NASDAQ:TSLA)’s faith in its vehicles despite slow growth in electric vehicle sales. The Elon Musk-led company plans to deliver 21,000 Model S cars this year. The sales figure is expected to double next year as Tesla Motors Inc (NASDAQ:TSLA) launches the Model S in Europe and Asia.

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Tesla CEO praises Panasonic

Tesla Motors Inc (NASDAQ:TSLA) plans to use Panasonic Corporation (OTCMKTS:PCRFY) (TYO:6752)’s batteries in its upcoming Model X, which is expected to hit the market by the end of 2014. Panasonic Corporation (OTCMKTS:PCRFY) (TYO:6752) has already been the primary supplier of battery cells to Tesla Motors Inc (NASDAQ:TSLA). According to Jonathan Welsh of The Wall Street Journal, Panasonic Corporation (OTCMKTS:PCRFY) (TYO:6752) is estimated to have supplied 200 million cells between December 2011 and December 2013. But now the Japanese company has been asked to supply 2 billion lithium-ion cells to Tesla Motors Inc (NASDAQ:TSLA) by 2017. The recent fire in a Model S car hasn’t deterred Elon Musk’s ambitions.

The Palo Alto-based company’s founder, Elon Musk, said after the agreement that Panasonic Corporation (OTCMKTS:PCRFY) (TYO:6752)’s cylindrical battery cells have been crucial to Tesla Motors Inc (NASDAQ:TSLA)’s success. Without the high-performance battery cells, the Model S may not have been able to achieve the 265-mile range. Musk plans to strengthen the relationship with the Japanese electronics company.

Tesla looking for other suppliers as well

However, the agreement with Panasonic Corporation (OTCMKTS:PCRFY) (TYO:6752) doesn’t mean Tesla Motors Inc (NASDAQ:TSLA) has ruled out other battery suppliers. The electric carmaker believes that it must diversify its supply chain to increase competition among suppliers. Tesla Motors Inc (NASDAQ:TSLA) recently added Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) to its battery supply chain. The company is also in talks with LG Electronics Inc. (KRX:066570). Tesla Motors Inc (NASDAQ:TSLA) shares were down 0.94% to $162.95 at 11:08 AM EDT.