Tesla and Panasonic Halt Plans To Expand Gigafactory - Model 3 Demand Slows

Jeannie Matthews
April 14, 2019

The Osaka-based company, which is the world's leading supplier of EV battery packs, has been planning a ~$1.4B upgrade of the massive factory which would boost available production capacity by an estimated 50 percent by 2020.

Panasonic Corp and Tesla Inc will continue to make new investments in the USA electric carmaker's Gigafactory as needed, but believe they can squeeze more out of existing resources than previously planned, Tesla said on Thursday.

Tesla slid 2.8 percent on the Nasdaq Thursday, while Panasonic shares rose 2.6 percent in midday Tokyo trade Friday. In particular, Tesla could see rampant growth China after its Shanghai factory is fully operation.

Tesla Inc. (TSLA.O) slumped after Nikkei reported the electric carmaker and Panasonic Corp. One would assume that any automaker buying Panasonic batteries would receive the same level of support.

The publication reports the two companies have frozen spending on the Nevada plant, culling plans for an expansion of battery production.

The analyst maintained his stance that Tesla's battery costs were too high for the company to achieve its aggressive targets for ramping up volume, as the cost made the cars too pricey for consumers.

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The deal will enable Tesla to manufacture its batteries in-house at the Gigafactory that opened in 2016, instead of buying the batteries Panasonic makes in Japan and shipping them to the US.

Hours after the report both companies responded and the theme of each company's message is similar: the current Gigafactory size can be optimized to increase production without the need for major capital projects.

So far, Tesla and Panasonic have invested US$4.5 billion in Gigafactory 1.

Panasonic commented on the decision stating: "Panasonic will study additional investments over 35 GWh in collaboration with Tesla".

Tesla's Gigafactory in Nevada where it produces battery cells for its electric vehicles. For the first time in a while, openings at Tesla's Palo Alto engineering and design facility have outpaced that at the company's Fremont, California manufacturing facility.

Lower-than-expected vehicle deliveries by Tesla in the first quarter spooked stock and bond investors earlier this month, adding to Wall Street's concerns about its future cashflow.

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