Tesla still does not get enough batteries from Panasonic

The delivery of batteries made by Panasonic remains the "basic limitation" on the production of Tesla products, the company said on Thursday. The electric car manufacturer does not get enough batteries from the production lines that Panasonic operates in the car manufacturer Reno, Nevada Gigafactory, to keep up with the number of cars and home energy storage products it wants to make. The two companies believe that several batteries can be made using the equipment at the factory, Tesla says.

The statement echoes what CEO Elon Musk told investors on a January 30 conference call, when he said that Tesla was "the cell leader for vehicle production," and that it had to refrain from producing its energy products to keep up with model 3- battery packs. And it shows that despite suffering through "production weekend" and "delivery logistics hell", a long-standing problem still governs model 3 success: the tension between what Tesla needs and what Panasonic can deliver.

In 201[ads1]4, Tesla announced that it signed an agreement with Panasonic to bring the battery manufacturer internally on Gigafactory, which opened in 2016. Instead of buying batteries made by Panasonic in Japan and having them shipped worldwide, the cells wanted to be produced inside the same building where it was planned to build battery packs for its first mass market electric car, model 3.

This vertical integration, combined with the massive scale Tesla planned to achieve at Gigafactory, would help reduce costs to a level " previously unattainable in battery cell and parcel production, "said Tesla in the 2014 announcement. But the first year of model 3 production was plagued by the slow speed and inconsistent quality of the battery (and battery pack). This led to delays in Tesla's high production targets.

Today's statement came as part of a response to a couple of reports published by Nikkei Asian Review suggesting that Panasonic will change its plans for two of Tesla's Gigafactories. Nikkei said that Panasonic "froze" a decision to put an additional $ 900 million to $ 1.35 billion of investment in Nevada Gigafactory in an effort to "reduce the dependence on the automaker." Tesla is Panasonic's largest customer of electric car batteries, and the Japanese battery machine had already suffered millions of losses due to the slower than expected ramp of model 3 production.

While Model 3 eventually became the best-selling electric vehicle in the world in 2018 despite the company's struggle, Tesla saw a record fall in deliveries in the first quarter of 2019. The decline is partly due to the company turning its focus away from North America and began delivering model 3s to two new markets: Europe and China. But some Wall Street analysts and skeptics in the company also believe that the demand for model 3 has been exhausted in North America, partly because Tesla cars are no longer eligible for full federal EV tax credit, and since the long-lifted $ 35,000 basic version of the car still has not sent.

This potential problem of demand, which Musk refused is supposedly a reason why Panasonic has got cold feet, according to Nikkei ]. The battery machine told Reuters that it is "[w] to cope with the demand situation" and "will study additional investments" beyond Gigafactory's current capacity.

Nikkei also reports that Panasonic has changed plans for Gigafactory which is now being built outside Shanghai. Tesla broke the ground at its first Chinese factory in January and plans to bring its production up by the end of 2019, as it is the key to the company's goal of becoming a major presence in China.

But neither Tesla nor Panasonic have announced whether the Japanese battery machine would make or deliver cells at or to the Shanghai factory. Tesla is in talks with two other Chinese battery machines – Lishen and Contemporary Amperex Technology Co. Limited, or CATL – to provide cells to the Shanghai factory.

Still, Nikkei reported Thursday that Panasonic will "suspend its planned investment in Tesla's integrated car battery and EV plant in Shanghai," and "instead provide technical support and a small number of Gigafactory batteries." No sources of these plans were named in the report.

A Tesla spokesman denied the report that Panasonic is planning to "freeze" investments in Nevada Gigafactory, saying that both companies "continue to invest substantial funds into Gigafactory." They added that Tesla believes that it is "far more production to be achieved by improving existing production equipment than previously estimated."

Existing production lines that have been updated since Gigafactory opened in 2016, "see significant gains," said the spokesman. This means that Tesla and Panasonic can achieve the same output unless used for the purchase of new equipment. The spokesman also said that this new focus on optimizing existing infrastructure would not affect Tesla's plans to triple the current size of Gigafactory.

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