Tesla, Panasonic halt Gigafactory expansion amid sagging vehicle demand: Report

Tesla and partner Panasonic are halting plans to expand production capacity at Gigafactory 1 amid signs of sagging demand for the company’s vehicles, according to a report on Thursday.

Gigafactory 1 is a hub where Tesla and Panasonic manufacture electric battery packs used in the cars, as well as other parts necessary to the production of the flagship Model 3 sedan and other vehicles. Tesla and Panasonic initially planned to raise capacity at the facility by 50 percent by 2020, according to Nikki Asian Review.

Tesla announced earlier this month that it had delivered 63,000 vehicles in its first quarter of 2019, far below analysts’ expectations. Tesla and Panasonic have already invested a combined $4.5 billion into Gigafactory 1, which reportedly has production capabilities to supply 500,000 vehicles each year at present.

“Both Tesla and Panasonic continue to invest substantial funds into Gigafactory. That said, we do believe there is far more output to be gained from improving existing production equipment than was previously estimated,” a Tesla spokesperson said in a statement. “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.”

Tesla also pushed back on the notion that a delivery slump contributed to the decision to pause the expansion, noting that “demand for cells continues to outpace supply.”

Tesla shares fell more than 2 percent in trading Thursday. Nikkei did not provide details on the sources of the report.


Panasonic did not immediately respond to a request for comment. The company is Tesla’s exclusive battery cell supplier.

This story has been updated.