Friday, 19 April, 2019

Tesla, Panasonic halt Gigafactory expansion amid sagging vehicle demand

Tesla and Panasonic hit the brakes on battery expansion Panasonic wants to invest more in Tesla
Priscilla Morrison | 12 April, 2019, 03:56

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

Panasonic's hesitation to pour more money into Gigafactory may be less of an indictment of Tesla, which reported a significant slowdown in the first quarter of this year, than it is on the status of EV and battery production.

Wall Street's fears over weakening Tesla Inc (NASDAQ: TSLA) demand are dampening progress.

The electric automaker, run by billionaire entrepreneur Elon Musk, made the comment in response to a report by Japanese news service Nikkei that said Tesla and Panasonic were pulling back on plans to increase the capacity of its plant, which supplies battery packs for the electric vehicles.

Giving no details of its sources, the Nikkei reported here that financial issues had led the companies to rethink plans to expand the capacity of Gigafactory 1 by another 50 percent next year. Instead of any capital investment, Panasonic will offer "technical support and a small number of batteries", which doesn't exactly sound confidence-inspiring.

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

Neither company had made public detailed future development plans for the site, although Panasonic said here in July previous year it would consider further investment in the Gigafactory if requested by the US electric carmaker.

"Watching the demand situation, Panasonic will study additional investments over 35 GWh in collaboration with Tesla".

Gigafactory 1 is a hub where Tesla and Panasonic manufacture electric battery packs used in the cars, as well as other parts necessary to the production of the flagship Model 3 sedan and other vehicles.

Tesla shares finished the day down 2.8 percent, at $268.42. Tesla has stated that 2019's goal is to produce 360,000 electric vehicles. If Panasonic doesn't think a long upgrade cycle for its primary battery manufacturing plant in the U.S.is worth the investment, it probably has a good reason for this.

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