Report points to weakening demand and thin profits.
A recent report via Nikkei Asian Review, an Asian financial publication, points to Tesla and Panasonic's decision to freeze further development at the Silicon Valley automaker's Nevada Gigafactory. However, as Reuters reports, Nikkei doesn't provide any sources to support the information.
As far as U.S. sales go, Tesla's numbers are down. We can equate some of this to its increased focus on overseas markets, but not all. Moreover, the company's Model S and Model X vehicles are not selling as well as they once were. While Tesla reported a profit recently, that may not prove to be the case for Q1 2019. This comes as no surprise since CEO Elon Musk already divulged that this may not the case.
In the past, Tesla has worked hard to surge forward, even despite spending perhaps too much (if that's even possible) on the future, while lessening profit potential in the present. However, at some point, there comes a time that a company must makes decisions to dial it back. If Nikkei's report is true, then Tesla and Panasonic have decided that further expansion of the Gigafactory at this point is unnecessary, especially if it causes more undue stress to the current financial situation.
Tesla shares fell after Nikkei reported that Panasonic is freezing spending on more Gigafactory expansion. Panasonic said it reached 35 GWh/yr capacity in March. That's already enough to build over 500k Model 3/yr+Powerwalls—more than Tesla can handle https://t.co/5y0MX9BI3x
— Tom Randall (@tsrandall) April 11, 2019
It seems that even though Tesla's Gigafactory is not nearly complete, it's providing what's needed for the current situation. To be honest, the Nevada battery factory could be continually expanding for many, many years to come. The company has much room to grow and there appears to be endless potential to expand and improve.
However, for now, if this report proves true, it's time to keep it as is, at least temporarily. Nikkei shares:
The partners had planned to raise capacity by 50% by next year, but financial problems have forced a rethink, Nikkei has learned.
The Gigafactory has been making batteries for the Model 3, Tesla's new small sedan, since January 2017. Panasonic manufactures the cells, and Tesla assembles them into battery packs.
The companies had intended to expand the plant's capacity to the equivalent of 54 gigawatt hours a year by 2020, up from 35 GWh at present.
The story goes on to point out that Panasonic lost some 20 billion yen (~180 million USD) in its financial year that just ended last month. Despite the situation, the two companies still plan to work together into the future. A Tesla spokesperson told Nikkei:
We will of course continue to make new investments in Gigafactory 1, as needed.
However, it says that Panasonic is also suspending its intended investment in Tesla's Shanghai, China-based Gigafactory.