Tesla shares dive after plans for Gigafactory 1 expansion failed

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

More trouble for Tesla as Panasonic freezes Gigafactory investments

The deal will enable Tesla to manufacture its batteries in-house at the Gigafactory that opened in 2016, instead of buying the batteries Panasonic makes in Japan and shipping them to the US.

The move comes after local media reports stated the two companies had frozen plans to expand capacity at the Gigafactory 1 site in Nevada by a further 50 per cent.

Some of those issues may be weakening demand for Tesla vehicles.

Lower-than-expected auto deliveries by Tesla in the first quarter spooked stock and bond investors earlier this month, adding to Wall Street's concerns about its future cashflow.

Tesla and Panasonic both have vested interest in the success of Gigafactory, the EV automaker's dedicated battery plant.

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"We believe there is far more output to be gained from improving existing production equipment than there was previously estimated".

The news represents a real reversal of Panasonic's plans; it recently expanded the US Gigafactory from 10 to 13 production lines to help the vehicle maker grow.

Panasonic, the exclusive battery-cell supplier for Tesla, will also suspend its planned investments in Tesla's Shanghai plant , Nikkei reported without detailing its sources.

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

Panasonic commented on the decision stating: "Panasonic will study additional investments over 35 GWh in collaboration with Tesla".

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Tesla is Panasonic's biggest battery client.

Company results have also been up and down. Dubbed the "Gigafactory", the facility will produce the lithium-ion cells, modules, and packs that power Tesla's all-electric vehicles. Nikkei Asian Review first reported on Panasonic's plans, citing unnamed sources familiar with the Japanese company.

Fact is, that neither Tesla nor Panasonic have put detailed future plans for the Nevada location on the table so far. Elon Musk confirmed late past year that the automaker's new Shanghai facility could dip into other battery suppliers beyond Panasonic, when the new facility begins operations. The new joint venture aims to be operating by 2020.

Tesla's stock traded lower by 3.3 percent to $266.89 per share Thursday morning.

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