Tesla's Poor 1st Quarter Gives Battery Supplier Cold Feet

Tesla, Panasonic Pull Back On Gigafactory Investments (NASDAQ:TSLA)

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.

"We will of course continue to make new investments in Gigafactory 1, as needed", a Tesla spokesman said in an e-mailed statement.

The two companies were responding to a report by Japan's Nikkei that said they had frozen previous plans to raise the capacity of the plant, which supplies battery packs for Tesla cars.

Tesla and partner Panasonic are halting plans to expand production capacity at Gigafactory 1 amid signs of sagging demand for the company's vehicles, according to a report on Thursday.

Some of those issues may be weakening demand for Tesla vehicles. Recently, Tesla missed its quarterly delivery expectations, which was also concerning because Chief Executive Officer Elon Musk told investors that the Company was efficiently producing vehicles. This seemed to confirm reading the report as potentially misguided because we had heard for the first time of involvement of Panasonic at Tesla's China Gigafactory. "We are seeing significant gains from upgrading existing lines to increase output, which allows Tesla and Panasonic to achieve the same output with less spent on new equipment purchases".

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

Having already splashed out $4.5bn on the factory, the two manufacturers had made a decision to freeze their spending plans, although Panasonic was looking into alternative Tesla projects in which to invest, Nikkei reported.

Gigafactory 1 is a massive United States dollars 4.5 Billion facility near Reno, Nevada where Tesla and Panasonic jointly manufacture battery packs for Tesla's vehicles and energy storage products. "Watching the demand situation, Panasonic will study additional investments over 35 GWh in collaboration with Tesla".

Tesla is Panasonic's biggest battery client. The company is scheduled to report first-quarter financial results on April 24.

Wall Street analysts have sounded the alarm in recent months about slowing demand for Tesla's electric vehicles.

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