Tesla, Panasonic modify expansion plans for gigafactory

Tesla and Panasonic have reportedly paused plans to add more battery production lines at Gigafactory 1, its massive factory outside of Reno, Nevada that is a cornerstone to the automaker’s business.

The Nikkei Asian Review initially reported Thursday that Tesla and Panasonic were freezing plans to expand capacity. Tesla disputes the report.

The partners had planned to increase capacity by 50 percent next year, but financial problems have forced a rethink, Nikkei reported without citing sources. Nikkei also reported that Panasonic was suspending a planned investment in Tesla’s automotive battery and EV plant in Shanghai.

Tesla has never announced Panasonic as an investor or partner in its China plant.

TechCrunch confirmed that Tesla is not adding more battery production lines and will instead focus its efforts on existing equipment.

Tesla stressed that it will continue to make new investments as needed into the plant. However, the automaker noted that attention and investments might be focused on improving existing equipment to increase battery cell output.

“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,” a Tesla spokesperson wrote in an emailed statement.

As of November, Panasonic had 11 production lines operating at Gigafactory 1. Panasonic president President Kazuhiro Tsuga told Bloomberg that the company planned to add two more lines by the end of the year to bring total capacity up to 35 gigawatt-hours. 

The last number shared by Tesla is from July when the company reported an annualized run rate of 20 gigawatt-hours of capacity. It’s not clear if those two production lines were added.

Panasonic has not responded to a request for comment. TechCrunch will update the story if Panasonic responds or updated information on production lines is provided.

Gigafactory 1, which broke ground in June 2014, is a critical ingredient in Tesla’s goal to accelerate the world’s transition to sustainable energy by expanding global battery capacity and reducing the cost of electric vehicles. And Panasonic has been its most important partner as a supplier and partner in that project.

Gigafactory 1 produces Model 3 electric motors and battery packs, in addition to Tesla’s energy storage products, Powerwall and Powerpack. Panasonic makes the cells, which Tesla then uses to make battery packs for its electric vehicles.

The factory is being built in phases and is currently about 30 percent complete. It has has a footprint of more than 1.9 million square feet and house more than 4.9 million square feet of operational space across several floors.

Tesla has said that the factory is expected to reduce the per-kilowatt-hour cost of Tesla lithium-ion battery packs by more than 30 percent, which will in turn drive down the cost for its electric vehicles.

The report from Nikkei suggests that falling demand prompted the change in plans, which lies in contrast to comments previously made by Tesla CEO Elon Musk. In the company’s last earnings call, Musk said demand for battery cells has outpaced supply. According to Tesla that demand hasn’t ebbed despite its recently released first-quarter delivery report that showed a nearly one-third drop from the previous quarter. Tesla has blamed the drop on problems delivering its Model 3 electric car to Europe and China, not demand.