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Tesla presses Japanese battery suppliers to innovate, take risks

TOKYO -- A Tesla Motors Inc. battery executive courted partners in Japan for its so-called gigafactory, praising local companies for top-notch quality and technology while cautioning against slow decision-making and risk aversion.

Japan ranks behind only North America as a source of parts for the maker of the Model S electric sedan, Kurt Kelty, Tesla's director of battery technology, said Friday in Osaka.

While he said that Tesla looks to Japan for the world's most advanced technology, including electric components and displays, he also alluded to weaknesses, without naming specific companies.

"We need to take risks, otherwise there will be no prosperity in business," Kelty said at an event hosted by the Osaka Business and Investment Center. "We take risks, but it seems not the case in Japan."

Tesla CEO Elon Musk wants to transform Tesla into more of a mass-market automaker by building a battery-cell factory big enough to supply 500,000 vehicles by 2020.

The Palo Alto, Calif.-based company is counting on close proximity of suppliers and economies of scale to reduce battery costs by 30 percent and let Tesla sell a $35,000 electric Model 3.

Tesla has so far joined with larger, established Japanese companies, such as Panasonic Corp. and Denso Corp., Kelty said.

The automaker is open to relationships with small and medium- size suppliers with good technology, he said.

Kelty said Japanese suppliers Tesla has worked with have shown strength in meeting commitments for parts delivery. At the same time, he said that moving too slowly has been a weakness among such companies.

Another test

"Decision-making often takes time," Kelty said. "For example, when the product is almost ready, they may want to do the test again."

Panasonic, Tesla's battery-cell supplier, this week forecast a 23 percent increase in profit in the fiscal year that begins next month as the Osaka-based electronics maker expands its automotive business.

The company has declined to confirm how much it will invest in Tesla's gigafactory. Musk has estimated that Panasonic's contribution will be $1.5 billion to $2 billion.

Kelty said Tesla once asked for a production increase from a Japanese supplier, which resisted and suggested the automaker slow its expansion plan. He didn't identify the supplier.

"We're a growing company, and therefore we need to put pressure on the suppliers, so the suppliers need to grow as well," Kelty said.

Chieko Gyobu, a Panasonic spokeswoman based in Tokyo, wouldn't comment on Kelty's remarks.

Hironori Yoshida, a spokesman for Kariya, Japan-based Denso, also declined to comment. Kelty worked more than 14 years for Panasonic before joining Tesla in March 2006. He is the lead negotiator with Panasonic to determine their partnership at the gigafactory, according to his LinkedIn profile.

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