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Report of Tesla Freezing Spending on USD 4.5 Billion Gigafactory

Posted on April 16, 2019 by Shreyas Tanna

Tesla, Inc. (NASDAQ: TSLA) slid by as much as 3.5% on Thursday morning after a report surfaced that the electric automaker and Panasonic are pausing the expansion of the Gigafactory 1, according to Nikkei Asian Review.

Gigafactory 1 is a massive USD 4.5 Billion facility near Reno, Nevada where Tesla and Panasonic jointly manufacture battery packs for Tesla’s vehicles and energy storage products. The facility also manufactures parts for the Model 3 sedan. Tesla also intends to manufacture the Model Y at the factory.

Tesla and Panasonic previously planned to increase the factory’s capacity by 50% by 2020, but have since reconsidered their plans, the Nikkei Asian Review said. “We will obviously keep on making new interests in Gigafactory 1, as required,” Tesla said in an announcement. “Be that as it may, we think there is undeniably more yield to be picked up from improving existing generation gear than was recently evaluated.” The report concerned investors because it could impact Tesla’s production and delivery rates. Recently, Tesla missed its quarterly delivery expectations, which was also concerning because Chief Executive Officer Elon Musk told investors that the Company was efficiently producing vehicles.The weaker demand and production rates for Tesla prompted the Company to expand overseas. Moreover, Tesla has initiated plans to manufacture its vehicles in Europe and China. In particular, Tesla could see rampant growth China after its Shanghai factory is fully operation.

“The immediate read on Panasonic/Tesla suspending plans for Gigafactory extension is the accomplices likely don’t see Tesla accomplishing anticipated deals volumes, and along these lines fundamental battery request,” Craig Irwin, an examiner at Roth Capital Partners, said in an exploration note on Thursday. Irwin cut his value focus on the name from USD 270 to USD 240 an offer, as per Business Insider. “We believe Tesla’s vehicle sales are slow because costs are simply too high for consumers,” he added.

Tesla shares have now fallen by 19.2% this year.

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