Report: Tesla's Battery Partner Grows Wary, Freezes Spending
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. Japan’s Nikkei Asian Review reports that the battery maker, which partnered with Tesla on the automaker’s Nevada Gigafactory 1, has grown cold feet.
The publication reports the two companies have frozen spending on the Nevada plant, culling plans for an expansion of battery production. Not only that, Panasonic has decided not to invest in Tesla’s Shanghai vehicle/battery production facility.
Weakening demand for Tesla vehicles and financial losses at Panasonic’s Tesla EV battery business are behind the move, Nikkei reports. The two partners had expected to grow Gigafactory capacity by 50 percent by 2020, with Panasonic on the hook for a further $900 million to $1.35 billion. Gigafactory 1 has gobbled up $4.5 billion from both companies since its creation.
Panasonic’s Tesla EV battery business reportedly lost roughly $180 million in the last fiscal year, with delays in getting Model 3 production up to speed hurting the supplier. The automaker’s Q1 delivery report showed a 31-percent reduction from the previous quarter. Production also fell.
With lofty production targets now looking less likely, it seems Panasonic moved to stem its losses. The partners will reportedly reevaluate their Gigafactory plans in 2020, or perhaps later, with further expansion dependent on sales volume.
“We will of course continue to make new investments in Gigafactory 1, as needed,” a Tesla spokesperson told Nikkei.
“Panasonic established a battery production capacity of 35GWh in Tesla’s Gigafactory 1 by the end of March 2019 in line with growing demand,” Panasonic said. “Watching the demand situation, Panasonic will study additional investments over 35GWh in collaboration with Tesla.”
In Shanghai, where Tesla’s new plant is under construction, Panasonic is suspending its expected investment, providing just technical support and a small number of Gigafactory-sourced batteries instead. It’s not entirely unexpected news. Tesla CEO Elon Musk claimed, earlier this year, that initial Model 3 production would commence in China by the end of this year — a very ambitious timeline. It isn’t known how Panasonic backing out will impact the company’s bottom line, or when Chinese customers can expect their domestically produced Teslas.
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