Tesla and Panasonic Moderate Expansion Plans for Battery Factory

Tesla and Panasonic are tempering expansion plans for the battery gigafactory they’ve plugged billions into the last few years, according to Bloomberg. That is deepening concerns about demand for the carmaker’s electric vehicles.

Tesla said that while it’s going to continue making new investment as needed in its plant outside Reno, Nevada, existing equipment may be able to produce far more output than previously estimated. Panasonic said it will study additional investment in collaboration with Tesla, following a Nikkei report that said the two had frozen spending plans.

A record decline in deliveries during the first quarter stoked concerns about slackening demand for the Model 3, the company’s newest and least-expensive car. While CEO Elon Musk last week reiterated a forecast for 360,000 to 400,000 vehicle deliveries in 2019, investors remain cautious given its history of missing ambitious projections.

Tesla and Panasonic had intended to raise capacity at the gigafactory by about 50 percent by 2020, but financial problems forced a re-think, the Nikkei said, without citing its sources. Panasonic also intends to suspend planned investment in Tesla’s battery and electric vehicle plant in Shanghai, and instead provide technical support and a small number of batteries from the existing gigafactory, the newspaper reported.

It’s unclear whether Panasonic’s involvement in the Shanghai plant was ever formalized. Bloomberg News reported last month that Tesla was in talks with top Chinese battery producer Contemporary Amperex Technology about supplying cells for the Model 3 cars it will assemble at the new factory.

Tesla’s financial strength has been a concern for investors. The company had to pay off a $920 million convertible bond in February, which ate into the about $3.7 billion of cash and equivalents it held at the end of last year. Musk warned on Feb. 28 that Tesla probably would lose money during the just-ended first quarter, and the carmaker has a $566 million note coming due in November. The company has said it has enough money to pay off debt obligations with cash flow.