Tesla, Panasonic to seek productivity gains before new battery investments

Tesla, Panasonic to seek productivity gains before new battery investments

Tesla and Panasonic hold expansion plans at Gigafactory 1 as worries over demand for Tesla cars grows.

Panasonic is responsible for the high tech battery chemistry inside of the Gigafactory, and once the batteries are completed they are handed to Tesla (NASDAQ:TSLA) to assemble and package them.

The news represents a real reversal of Panasonic's plans; it recently expanded the US Gigafactory from 10 to 13 production lines to help the vehicle maker grow. However, the decline and then loss of eligibility for the federal tax credit may hurt sales of the Model 3 in the U.S. Tesla denies that Panasonic plans to freeze investment in Nevada factory A spokesperson for Tesla denied that Panasonic was planning to freeze investment in the Nevada plant and claimed that both companies were continuing to invest substantial money into the plant. Not only that, Panasonic has decided not to invest in Tesla's Shanghai vehicle/battery production facility.

Tesla's lackluster first-quarter deliveries report did more than spook analysts and investors - it also provided the rationale for Panasonic to reevaluate its relationship with the automaker.

"We will of course continue to make new investments in Gigafactory 1, as needed", Tesla said in a statement to CNBC, commenting on the report.

Tesla Chief Executive Officer Elon Musk also said in November the US company would manufacture all its battery modules and packs at its new Shanghai factory and planned to diversify its sources.

Batteries produced there aren't just for Tesla's cars, mind. The company is scheduled to report first-quarter financial results on April 24.

However, Tesla and Panasonic have now chose to freeze major investments in expanding the Gigafactory 1 capacity because EV sales have been below expectations, Nikkei reports. Tesla has stated that 2019's goal is to produce 360,000 electric vehicles. Panasonic has said it will study further expansion of the Nevada plant and that it was considering possibilities for the Shanghai plant.

This deal was meant to reduce battery production costs to levels "previously unobtainable in battery cell and pack production". Tesla is Panasonic's biggest customer for EV batteries. The new joint venture aims to be operating by 2020.

Tesla declined as much as 4.7 per cent to US$263.20 in pre-market USA trading.

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