Economy

Why Tesla, Panasonic Are Delaying Gigafactory Expansion

Why Tesla, Panasonic Are Delaying Gigafactory Expansion

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.

(PCRFY.PK) are suspending plans to expand the capacity of their US$4.5 billion USA plant in the face of uncertain demand for electric vehicles. The representative said that both companies "continue to invest substantial funds" to keep the cogs of Gigafactory turning. That said, we do believe there is far more output to be gained from improving existing production equipment than was previously estimated. Not only that, Panasonic has decided not to invest in Tesla's Shanghai vehicle/battery production facility. This would go up if their plan to expand the current 35 gigawatt-hours to 54 gigawatt-hours had pushed through.

Slowdowns in production of Tesla's Model 3 sedan, its most affordable electric vehicle, ate into Panasonic's profits and reflected a reality for mainstream EV producers-lower prices require higher volumes for profitability. Now, the companies said, they will likely wait until at least that deadline before any expansion will take place.

Tesla shares fell 4.2% to US$264.45 in premarket trading on Thursday. If Panasonic doesn't think a long upgrade cycle for its primary battery manufacturing plant in the U.S.is worth the investment, it probably has a good reason for this. "It helps the company reduce the influence of Tesla". Only Tesla would have better insight into demand planning than the maker of its battery packs, which are said to cost upwards of 40 percent of the cost of the vehicle.

More news: Essential stats ahead of Liverpool vs Chelsea at Anfield

In February, Tesla said it had agreed to buy US energy storage company Maxwell Technologies Inc, sending shares in Panasonic lower.

Chief Executive Officer Elon Musk last week reiterated a forecast for 360,000 to 400,000 vehicle deliveries in 2019.

FILE PHOTO: A logo of Panasonic Corp is pictured at the CEATEC JAPAN 2017 (Combined Exhibition of Advanced Technologies) at the Makuhari Messe in Chiba, Japan, October 2, 2017. While batteries were once the bottleneck for Tesla production, now the Gigafactory is said to have an annual capacity in the region of 500,000 cars.


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