Tesla Inc.’s main battery supplier in the U.S., Panasonic Holdings Corp., PCRFY -1.05%▼ said it would build a $4 billion electric-vehicle battery factory in De Soto, Kan., the latest move in the EV industry’s race to ramp up capacity.

The new plant comes in tandem with Tesla’s plans to boost U.S. production, including at a factory in Austin, Texas, that started delivering vehicles in April.

Japan-based Panasonic is battling larger South Korean and Chinese rivals for share of the EV battery market. General Motors Co. is planning a $2.6 billion battery plant in Lansing, Mich., with South Korean partner LG Energy Solution, 373220 -0.13%▼ while auto maker Stellantis STLA -0.73%▼ NV and South Korea’s Samsung SDI Co. SSDIY 0.00%▲ are planning a $2.5 billion plant in Indiana.

“Expanding battery production in the U.S. is critical to help meet demand,” said Kazuo Tadanobu, chief executive of Panasonic Energy, a unit of Panasonic Holdings that makes EV batteries.

Kansas beat out Oklahoma for the Panasonic Energy factory, in part by offering a package of subsidies that includes tax credits and partial rebate of payroll of up to 10% a year.

Kansas Gov. Laura Kelly, a Democrat, called it the largest private investment in Kansas history and said it would create as many as 4,000 direct jobs.

Panasonic Energy already has a joint-venture battery factory with Tesla in Nevada, known as the Gigafactory, but recently it has been touting a lithium-ion battery type different from the one made in Nevada.

Panasonic’s cylindrical 4680 battery, so called because it is 46 millimeters in diameter and 80 millimeters high, is larger and more powerful than its previous EV batteries and could improve the economics of EVs. The company is set to start trial production of its 4680 battery this year in Japan.

Mr. Musk has called the 4680 technology the “world’s most advanced cells.” Tesla is working on its own 4680 cells.

A Panasonic spokeswoman said the company hasn’t decided what type of batteries the Kansas factory will make.

Chinese companies are at the forefront of the EV battery race, a situation that has caused concern in Washington. China’s Contemporary Amperex Technology Co., or CATL, and BYD Co., a Chinese company partially owned by Warren Buffett’s Berkshire Hathaway Inc., are investing heavily in new technology.

In March, President Biden invoked the Defense Production Act to boost domestic EV battery manufacturing. “We need to end our long-term reliance on China and other countries for inputs that will power the future,” he said.

The Panasonic plant “makes us less dependent upon China,” said Sen. Jerry Moran (R., Kan.) at a news conference with the governor.