Tour of Tesla battery gigafactory for invited owners, Reno, Nevada, July 2016
Battery-giant Panasonic put a damper its planned investment of hundreds of millions of dollars to expand Tesla's Gigafactory site in Nevada, raising concerns that slowing investment could slow the pace of progress for EVs.
Media reports indicated that Panasonic was reportedly considering investments of up to $1.3 billion for battery production to extend the facility's capacity by 50%. Those plans have been put on hold until 2020 or later. Nikkei Asian Review first reported on Panasonic's plans, citing unnamed sources familiar with the Japanese company.
For now, it appears that Tesla will expand its site near Reno, Nevada, alone, although the automaker hasn't revised expected deliveries for its electric cars for 2019.
“We will of course continue to make new investments in Gigafactory 1, as needed. However, we think there is far more output to be gained from improving existing production equipment than was previously estimated," Tesla said in a statement.
Panasonic's hesitation to pour more money into Gigafactory may be less of an indictment of Tesla, which reported a significant slowdown in the first quarter of this year, than it is on the status of EV and battery production.
Panasonic's Tesla battery business lost roughly $180 million in the fiscal year that ended in March, according to Nikkei, more than last year. Slowdowns in production of Tesla's Model 3 sedan, its most affordable electric car, ate into Panasonic's profits and reflected a reality for mainstream EV producers—lower prices require higher volumes for profitability. Lower profits mean less development to make the batteries cheaper to produce.
The net spiral could take its toll on battery producers going forward.
For now, it appears that Tesla will diversify its battery suppliers, including producers in China, and its partnership with Panasonic may be renewed in 2020, sometime closer to expected production of the Model Y crossover.