Freeze at Tesla Gigafactory Hints at Slower Sales, Analyst Says

Ann Santiago
April 14, 2019

Nikkei Asian Review first reported on Panasonic's plans, citing unnamed sources familiar with the Japanese company.

Tesla shares fell 4.2% to US$264.45 in premarket trading on Thursday. He also said that Tesla thought that there could be far more output produced simply by improving existing equipment than was previously thought.

A Tesla spokesman told Nikkei, "We will of course continue to make new investments in Gigafactory 1, as needed".

Tesla's Gigafactory in Nevada where it produces battery cells for its electric vehicles.

"Panasonic established a battery production capacity of 35 GWh in Tesla's Gigafactory 1 by the end of March 2019 in line with growing demand", Japan-based Panasonic wrote in an email to Reuters. Nikkei's report claims that it's now too risky to make major investments like those mentioned, blaming the pause on both thin operating margins in the industry and EV sales that are "performing below plans". Panasonic also intends to suspend planned investment in Tesla's battery and electric vehicle plant in Shanghai, and instead provide technical support and a small number of batteries from the existing gigafactory, the newspaper reported. The report claimed that Panasonic wanted to reduce its dependence on Tesla.

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

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Panasonic is the exclusive battery cell supplier for Tesla, which in turn is Panasonic's biggest EV battery client. 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. Only Tesla would have better insight into demand planning than the maker of its battery packs, which are said to cost upwards of 40 percent of the cost of the vehicle.

The report concerned investors because it could impact Tesla's production and delivery rates.

The Nevada Gigafactory has enough capacity to supply batteries for 500,000 vehicles a year. Earlier this month Tesla warned investors the firm had suffered a record quarterly drop in auto deliveries.

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