Tesla claimed that a shortage of batteries made by Panasonic is the fundamental constraint on the production of Tesla EVs. Tesla says it is not getting enough batteries from the Nevada Gigafactory to keep up with the number of vehicles it wants to make.
Both companies believe that even with existing equipment more batteries can be produced according to Tesla.
CEO Musk also complained about battery production.
In a January 30th conference Elon Musk told investors that the company was "cell-starved for vehicle production". He claimed that the company had to forgo the manufacture of some of its home energy products so that it would have a sufficient number of Model 3 battery packs. There is still a tension between Tesla's needs for batteries and what Panasonic is able to deliver.
The Tesla deal with Panasonic
The deal was announced in July of 2014 as reported in a Verge article: "Electric car manufacturer Tesla has today announced a partnership with Japanese electronics giant Panasonic to build a large battery manufacturing plant on US soil. Dubbed the "Gigafactory," the facility will produce the lithium-ion cells, modules, and packs that power Tesla's all-electric vehicles. While Panasonic will be doing the actual manufacturing, Tesla will manage the site and assemble the cells into packs and modules."
The deal will enable Tesla to manufacture its batteries in-house at the Gigafactory that opened in 2016, instead of buying the batteries Panasonic makes in Japan and shipping them to the US. Tesla wants to make the batteries in the same building where it plans to build its battery packs for the Model 3.
Problems at the new Gigafactory
Through the vertical integration and large scale production at the Gigafactory, Tesla hoped to reduce costs to a level that could not be previously reached in the production of battery cells and packs the company boasted in a 2014 announcement. However, the first year of Model 3 production hit plenty of snags with the pace of battery packs produced being slow and also there was inconsistent quality of batteries. This led to delays in meeting Tesla's production goals.
Panasonic freezes plans for large investment in two Gigafactories
A pair of reports in the Nikkei Asian review suggested that Panasonic is changing plans for two of Teslas' Gigafactories. The report claimed that Panasonic froze a decision to put another $900 million to $1.35 billion into the Nevada Gigafactory. The report claimed that Panasonic wanted to reduce its dependence on Tesla.
Tesla is Panasonic's biggest customer for EV batteries. Panasonic has suffered millions in losses in the slower than expected ramp-up of Model 3 production.The Model 3 eventually was to be the best-selling EV globally in 2018 in spite of the company's problems. However, in the first quarter of this year there has been a record drop in deliveries. However, Tesla is now changing its focus to markets in Europe and China. However, the decline and then loss of eligibility for the federal tax credit may hurt sales of the Model 3 in the U.S.
Tesla denies that Panasonic plans to freeze investment in Nevada factory
A spokesperson for Tesla denied that Panasonic was planning to freeze investment in the Nevada plant and claimed that both companies were continuing to invest substantial money into the plant. He also said that Tesla thought that there could be far more output produced simply by improving existing equipment than was previously thought.
The existing production lines have been upgraded since the Gigafactory opening in 2016. The Tesla spokesperson said that the improvements had led to greater production with less money spent on new equipment but said Tesla still plans to triple the size of the current Nevada plant.
Panasonic suspends investments plans in Shanghai plant
Nikkei also claims that Panasonic is shifting plans for Tesla's Gigafactory that is being built at present outside of Shanghai. Ground was broken for the plant this January and hopes to have production up and running by the end of this year, as the plant is key to its presence in China. The government allowed Tesla to wholly own the factory rather than form a joint enterprise with a Chinese partner. Neither Tesla nor Panasonic have said that Panasonic would be supplying batteries for the plant.
Indeed, Nikkei reports that Panasonic has suspended plans to invest in Tesla's Shanghai EV plant. Instead it said that it would provide technical support plus a small number of batteries from the Gigafactory. However, no sources for these claimed plans were given in the report.
Apparently Tesla is also exploring the possibility of having Chinese companies provide batteries for the Shanghai plant. As a recent article reports: "Tesla Inc is in discussions with Chinese battery maker Contemporary Amperex Technology Co Ltd (CATL) for ordering rechargeable batteries to power its Model 3 cars, Bloomberg reported on Monday, citing people familiar with the matter."
Previously published in Digital Journal
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