Panasonic’s new 2170 Li-ion battery cells, which it manufactures at Tesla’s Gigafactory 1 in Nevada, are a key component of the new Model 3. The Japanese manufacturer says it is now supplying the batteries at a loss, but expects to turn a profit next year.

“For battery cells for the Model 3, costs outweighed profit in the first quarter,” CFO Hirokazu Umeda told Reuters. “As production accelerates towards next year, we expect the business to contribute profit.”

Panasonic plans to be manufacturing 35 GWh of battery cells next year.

Elon Musk said recently that the 2170 cells, which were co-designed by Tesla and Panasonic, are more energy-dense than the cells in Models S and X. The larger cell size allows Tesla to use fewer modules, with fewer cells in each. A Model 3 battery pack contains only 3 modules, compared to the 16 modules in a Model S pack.

Source: Reuters via Electrek