Economy

Panasonic says reviewing further investment in Tesla Gigafactory

Panasonic says reviewing further investment in Tesla Gigafactory

Nikkei also reported that Panasonic will suspend planned investment at Tesla's new Shanghai plant and will instead provide technical support to the project.

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. Tesla owns the land that Gigafactory 1 is constructed on, and the building itself; it leases some of the space to Panasonic, which owns some of the equipment used for cell production.

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

Shares of Tesla fell Thursday following a report the electric auto company and electronics giant Panasonic are suspending plans to expand a battery plant due to weak demand for the vehicles. In the March quarter, Tesla delivered 63,000 vehicles, down from 90,966 in the final three months of 2018.

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

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Nikkei itself quotes a Tesla spokesman with the words: "We will, of course, continue to make new investments in Gigafactory 1, as needed". Tesla CEO Elon Musk said last November that the company would manufacture all its battery modules and packs at the new Shanghai plant, where it also planned to build more vehicles.

For now, it appears that Tesla will expand its site near Reno, Nevada, alone, although the automaker hasn't revised expected deliveries for its electric cars for 2019. Tesla and Panasonic had been looking to raise capacity at the facility by 50-percent in 2020; now, according to sources speaking to the Nikkei Asian Review, that's been put on hold. Elon Musk confirmed late previous year that the automaker's new Shanghai facility could dip into other battery suppliers beyond Panasonic, when the new facility begins operations.

The report had Tesla shares trading down 3 percent on Thursday, and added fuel to investors concerns regarding the demand for Tesla vehicles.

Panasonic is the exclusive battery cell supplier for Tesla, which in turn is Panasonic's biggest electric vehicle battery client. Tesla is expected to report first-quarter earnings on April 24, this is expected to be a key report for the company.