Tesla Gigafactory expansion on hold as partner Panasonic eyes EV demand

Tesla and Panasonic are freezing their future plans until the market indicates further EV growth.

Tesla and battery supply partner Panasonic announced Thursday that plans to expand the capacity of the latter's battery production at the Nevada Gigafactory have been placed on hold pending indications of renewed demand for electric vehicles.

The companies had originally planned to increase capacity from 35 gWh to 54 gWh by 2020. Now, the companies said, they will likely wait until at least that deadline before any expansion will take place. Panasonic is holding off on plans to invest in Tesla's Shanghai facility.

This is not a hard-and-fast timeline. A Tesla representative told Nikkei that the companies will "[...] continue to make new investments in Gigafactory 1, as needed."

Lower-than-expected first-quarter production and delivery volumes for Tesla have prompted skepticism from analysts and investors who point to the expiration of EV subsidies and fulfillment of Model 3 pre-order deliveries as significant contributors to the company's slackening sales despite making its first round of deliveries of its new compact overseas (where those sales have contributed to as much as a quintupling of Tesla's sales volumes in those markets).

Tesla's best hope for spurring additional volume is the production of its new Model Y crossover. Sharing chassis and battery architecture with the Model 3 sedan, the Model Y should contribute much-needed volume with limited additional investment.

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