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OSAKA, Japan—Panasonic Corp. issued a bullish forecast on its business with Tesla Motors Inc. despite a May accident that killed a Tesla driver, saying Panasonic's car-battery revenue from the electric-vehicle maker and others will more than double in the next three years to about $4 billion.

Panasonic is the exclusive supplier of the lithium-ion batteries that power Tesla's Model S sedan, Model X sport-utility vehicle and the coming mass-market Model 3, which Tesla says will be available late next year. The two companies are building a battery "gigafactory" in Nevada, set to cost up to $5 billion.

"We are currently installing machinery, and the recent accident won't affect our plan to launch the factory this year," Kenji Tamura, the head of Panasonic's energy business, told a briefing for reporters. The fatal accident, in which a Model S crashed into a tractor-trailer on a Florida highway, plunged Tesla into controversy. The company said it was the first death of a Tesla driver who was using the car maker's Autopilot self-driving function.

Mr. Tamura said Panasonic will speed up its $1.6 billion investment in the factory to catch up with stronger-than-expected demand for the Model 3. He forecast that revenue from Panasonic's car-battery business, including Tesla, will hit ¥ 400 billion ($4 billion) by the year ending March 2019, up from ¥ 180 billion in the year ended this past March. Though better known to consumers as a maker of televisions and home appliances, Osaka-based Panasonic has increasingly been relying on auto makers for growth.

South Korean battery makers have been looking to cut into Panasonic's business with Tesla. After recent speculation about South Korean inroads, Tesla CEO Elon Musk said on his official Twitter account that Panasonic is the exclusive battery supplier for the Model S, Model X and Model 3.

Mr. Tamura said he is confident Panasonic will be able to keep the exclusive contract by consistently improving its batteries, such as by increasing their lifespan. Analysts say the biggest question mark for Panasonic is the future size of the electric-car industry.

"It's not clear yet whether demand for electric cars will increase at a fast pace," said Yu Okazaki, an analyst at Nomura Securities. "We should pay attention to gasoline-price movements and concerns about the safety of electric vehicles, which would all affect customer preference and the industry outlook."

Panasonic forecasts that by 2025 the automotive battery industry will grow to ¥ 2.9 trillion ($29 billion), six times its size in 2015, helped by strengthening environmental regulations that may make it harder for gasoline-powered cars to stay on the road.

Mr. Tamura said Tesla isn't the only customer for Panasonic car batteries. In addition to the U.S. factory, Panasonic is building a battery factory in China that is set to start operating by March 2018. It opened a battery R&D center in Yokohama, Japan, in April.

Write to Takashi Mochizuki at takashi.mochizuki@wsj.com

(END) Dow Jones Newswires

July 08, 2016 09:05 ET (13:05 GMT)

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