Panasonic reconsidering future investments in Tesla Gigafactory

Panasonic reconsidering future investments in Tesla Gigafactory

Battery producer is studying future investments as it watches demand reports for electric vehicles.

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Cleveland, Ohio – Panasonic will meet 2019 commitments to boost battery capacity output for Tesla, but the company is reconsidering further investments as it is “watching the demand situation” for electric vehicles (EVs).

In 2014, Panasonic and Tesla agree to produce 35GWh of battery storage capacity annually by the end of 2019, and Panasonic officials say they plan to meet that commitment. However, the deal called for 50GHw of capacity by the end of 2020, a figure for which Panasonic officials are now “studying feasibility of various options.”

The decision won’t hurt Tesla’s ability to grow EV sales this year, but it casts doubt on how much EV demand is growing. In the first quarter of this year, Tesla deliveries badly missed expectations, and EV maker is taking steps that could further limit demand.

Tesla leaders have long promised that its Model 3 would be available for $35,000, and the company briefly produced a handful of such lower-priced versions this year. But at the same time that Panasonic said it was reconsidering further battery investments with Tesla, the automaker announced that it would no longer offer the$35,000 Model 3 for order on its website – Tesla’s primary order portal for customers.

Instead, people seeking the lower-priced model will have to go to Tesla showrooms (which only exist in a handful of large cities) or call the company’s phone center. The least expensive Model 3 on the company’s website starts at $39,500.

Tesla officials billed the Panasonic decision as a change in strategy, not a reduction in investments.

“There is far more output to be gained from improving existing production equipment than was previously estimated,” Tesla officials said. “We are seeing significant gains from upgrading existing lines to increase output, which allows Tesla and Panasonic to achieve the same output with less spent on new equipment purchases.”

Officials added that demand for batteries continues to outstrip its ability to make them. Panasonic’s announcement does anticipate demand growth this year. So, the decision to curtail commitments to future investment could either be because efficiencies will allow more than 35GWh of capacity without new investment or because Panasonic officials aren’t convinced that demand will surpass that 35GWh figure.

About the author: Robert Schoenberger is the editor of Today's Motor Vehicles and a contributor to Today's Medical Developments and Aerospace Manufacturing and Design. He has written about the automotive industry for more than 18 years at The Plain Dealer in Cleveland, Ohio; The Courier-Journal in Louisville, Kentucky; and The Clarion-Ledger in Jackson, Mississippi.

rschoenberger@gie.net