Tesla battery supplier halts expansion, raising red flags

Tesla Nevada Factory

Panasonic is freezing plans to expand its role as Tesla’s electric car battery supplier, a move that raises new questions about demand for Tesla’s Model 3 — and the company’s future.

“The Panasonic news is a gut punch. This fans the flames on overall demand worries and profitability concerns going forward," said the usually bullish Dan Ives, equity analyst at Wedbush Securities.

Japan’s Nikkei Asian Review reported Thursday that Panasonic will abandon for now its plans to expand battery cell manufacturing capacity at Tesla’s Nevada battery factory by 54% next year. The previously planned expansion would have increased production from 35 gigawatt hours per year to 54 gigawatt hours.

In a statement, Panasonic said it “established a battery production capacity of 35 GWh in Tesla’s Gigafactory 1 by the end of March in line with growing demand. Watching the demand situation, Panasonic will study additional investments over 35 GWh in collaboration with Tesla."

A Tesla spokesman said Thursday the company’s demand for batteries remains strong. “Contrary to what is implied in [the Nikkei] report, our demand for cells continues to outpace supply. It remains the fundamental constraint on Tesla vehicle and Powerwall/Powerpack production." Powerwalls and Powerpacks are home and utility battery storage products assembled and sold by Tesla.