Panasonic Thinks Twice About Investing More Money with Tesla

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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 auto maker grow.

Tesla and Panasonic previously planned to increase the factory's capacity by 50% by 2020, but have since reconsidered their plans, the Nikkei Asian Review said.

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

"We believe Tesla's vehicle sales are slow because costs are simply too high for consumers", he added.

Panasonic President Kazuhiro Tsuga's bet on Tesla has also been a source of concern. Panasonic is said to have suspended the investment it had planned to make in the Shanghai facility, and will instead offer only "technical support and a small number of batteries from the Gigafactory".

"Panasonic established a battery production capacity of 35 gigawatt hours a year (GWh) in Tesla's Gigafactory 1 by the end of March 2019 in line with growing demand", Panasonic said in a statement provided to Reuters.

The rate at which Panasonic is supplying batteries to Tesla remains the "fundamental constraint" on Tesla product production, reports The Verge. The company had reiterated its annual delivery forecast of 360,000 to 400,000 cars earlier this month.

Shares of Tesla fell Thursday following a report the electric auto company and electronics giant Panasonic are suspending plans to expand a battery plant due to weak demand for the vehicles.

Panasonic is the exclusive battery cell supplier for Tesla, which in turn is Panasonic's biggest electric vehicle battery client. "Turning cautious about further investments is good for Panasonic". 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.

"We will of course continue to make new investments in Gigafactory 1 as needed", a spokesperson for Tesla said. The plan is said to have the capability to produce more than 500,000 electric vehicles per year.

Tesla's lackluster first-quarter deliveries report did more than spook analysts and investors - it also provided the rationale for Panasonic to reevaluate its relationship with the automaker.

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