Tesla turning to Samsung SDI for batteries, Panasonic pumps up the volume

Tesla Motors has, over its short life, sourced its batteries pretty much exclusively from Panasonic. Now that sales of the Model S are blowing up – expected to be in excess of 21,000 units this year, with production ability increasing to potentially double that – and the company's future product path is becoming more clear, it seems time to diversify its battery supply lines.

Tesla may eventually need more lithium cells than the entire laptop industry.

The automaker may eventually have a need for more lithium cells than the entire laptop industry and finds itself one earthquake (or other natural disaster) away from a huge production disruption. If previous rumors and an unidentified "source close to the matter" used by The Korea Herald for a recent report are to be believed, Samsung SDI will be the first to offer an alternative to Tesla's traditional Japanese supplier. It currently makes the cells for the BMW i3, the Fiat 500e and is said to have a contract with Volkswagen.

The deal is yet to be finalized, with testing still ongoing. According to the report, LG Chem was also in the running but was beat out by its Korean competitor and Chinese battery maker BYD may be working out its own deal.

For its part, Panasonic is not sitting still. Earlier this month, it was reported that the Japanese company is increasing its production of automobile-specific lithium cells, with two separate facilities in Osaka Prefecture coming online in 2014 to boost output. Battery sales are becoming increasingly important to the company's bottom line, adding 4.1 billion yen ($41.66 million US at today's rates) to its balance sheet last quarter.

Besides dealing with the diversification issue, we expect increased competition for Tesla's high-energy capacity, 18650-format battery business should spur lower prices and improve the technology.

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