Report: Tesla's Battery Partner Grows Wary, Freezes Spending

Steph Willems
by Steph Willems
report teslas 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.

[Image: Tesla]

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11 of 45 comments
  • EBFlex EBFlex on Apr 11, 2019

    Panasonic wants out. They realize that Tesla is a terrible company run by a guy who is very unstable and a massive risk. My guess is Panasonic wants to do business with a reputable automotive company that has a sound business and knows how to build cars.

    • See 5 previous
    • Higheriq Higheriq on Apr 12, 2019

      @SuperCarEnthusiast Tesla is headed down the tube. What is your point?

  • Bullnuke Bullnuke on Apr 11, 2019

    There have been several posts over the last few days regarding Elon and his Tesla but I choose this one to applaud Mr. Musk and the SpaceX team. I just saw the Falcon Heavy launch and recovery of all three boosters. Damned awesome! He may be having issues with his terrestrial vehicles but his adventures into space are truly amazing and appear damned successful. Bravo!

    • See 2 previous
    • JimZ JimZ on Apr 12, 2019

      @ToolGuy Since that’s not going to happen, why should I waste any time on your nonsensical what-if?

  • Redapple2 C2 is the best. C3 next. Then C7 (looking at you jimII).
  • Jeff S Vulpine--True the CAFE rules are for ICE.
  • Gray I grew up in the era of Panther and Fox platforms. If only they developed a good looking two door Conti. The four doors became a cult in their own right. And kept the 351W as a top line option.
  • Vulpine ABSOLUTELY YES!!! Bring back the TRUE compact trucks. The demand for them is far higher than the OEMs want to admit.
  • Brn More likely, with Google having troubles, the money tree isn't as ripe as it once was and cutbacks are needed.I hope the overall industry continues to evolve. When I get the the point I can't easily drive, I would still appreciate the independence that autonomous vehicles can bring.