More trouble for Tesla as Panasonic freezes Gigafactory investments

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More trouble for Tesla as Panasonic freezes Gigafactory investments

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.

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.

So far, Tesla and Panasonic have invested US$4.5 billion in Gigafactory 1.

On Thursday morning, Japan's Nikkei Asian Review reported that Panasonic has chose to stop its planned investments in Tesla's Gigafactories. The company will, however, provide technical support and a small number of batteries from the now operating Gigafactory.

"That said, we believe there is far more output to be gained from improving existing production equipment than was previously estimated". The two companies had planned on boosting production capacity at the US Gigafactory from 35GWh to 54GWh by 2020; that now seems unlikely.

Once the Nikkei report surfaced, shares of Tesla dropped almost three percent because of what the report implies: EV demand may not be growing as quickly as expected and in that case, costly upgrades to produce more batteries wouldn't be needed.

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

"Both Tesla and Panasonic continue to invest substantial funds into Gigafactory", a Tesla spokesperson told The Post in a statement, referring to electronics maker Panasonic, which is Tesla's battery cell supplier. At the same time, it has also decided with Tesla to freeze spending to expand Gigafactory 1, which has manufactured Model 3 batteries since 2017. Tesla shares have declined by 17 percent year to date.

The report about moderated expansion plans for Gigafactory 1 comes a week after Tesla reported lackluster vehicle deliveries numbers for the first quarter of 2019. Tesla has stated that 2019's goal is to produce 360,000 electric vehicles. Of course, we will have same-day coverage of Tesla's 1Q 2019 results right here!

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