Tesla, Panasonic Reportedly Halt Nevada Gigafactory Expansion

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

Tesla declined as much as 4.7 per cent in pre-market trading and was down 3.4 per cent to US$266.80 as of 8:28am on Thursday in NY.

"We will of course continue to make new investments in Gigafactory 1, as needed", Tesla said in a written statement to Bloomberg News.

The companies plan to revisit their Gigafactory expansion plans in 2020 depending on Model 3 and Model Y sales at that time. The pair had planned to increase capacity at the world's biggest electric vehicle battery plant by next year, the Nikkei reported, but financial problems have led them to reconsider that plan.

Tesla shares dropped as much as 3.8 percent in NY on Thursday after Nikkei reported that Tesla and Panasonic were freezing the expansion of the Gigafactory near Reno, Nevada.

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The rate at which Panasonic is supplying batteries to Tesla remains the "fundamental constraint" on Tesla product production, reports The Verge.

The land of Tesla Gigafactory at a groundbreaking ceremony of Tesla Shanghai Gigafactory in Shanghai, China January 7, 2019. Panasonic builds the cylindrical battery cells themselves, while Tesla arranges those cells into battery packs before installing them in cars at its Fremont facility in California. The report claimed that Panasonic wanted to reduce its dependence on Tesla. Moreover, the article states that Panasonic intends to freeze its investments in Gigafactory 3 in Shanghai as well. Tesla has been through a rough patch and it seemed that through the latter parts of 2018, that saw the company turn a profit and improve it cash flows, may be in for choppy waters ahead.

While Tesla was working hard to ramp up production of Model 3, the EV maker faced challenges in deliveries and its total vehicle deliveries in the first quarter slumped by 31 percent from the previous quarter and were well below analyst estimates. The plan is said to have the capability to produce more than 500,000 electric vehicles per year.

Tesla did say USA orders for Model 3 vehicles significantly outpaced what it was able to deliver in the first quarter, and the company reaffirmed its prior guidance of 360,000 to 400,000 vehicle deliveries in 2019.

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