Shares of Tesla Inc. (NASDAQ: TSLA) dropped by about $10 Thursday morning on a report that the company and investment partner Panasonic have frozen their plan to lift production by 50% at Tesla’s Nevada Gigafactory battery plant. At the end of last month, the plant’s capacity was 35 gigawatt-hours (GWh) at the site near Reno.
Panasonic is taking the additional step of suspending further investment in Tesla’s new Gigafactory near Shanghai. Tesla CEO Elon Musk said last November that the company would manufacture all its battery modules and packs at the new Shanghai plant, where it also planned to build more vehicles.
The decision was first reported by Nikkei Asian Review, saying only that it had “learned” of the suspension without citing any sources. Panasonic has said it will study further expansion of the Nevada plant and that it was considering possibilities for the Shanghai plant.
A Tesla spokesman told Nikkei, “We will of course continue to make new investments in Gigafactory 1, as needed.”
The Nevada Gigafactory has enough capacity to supply batteries for 500,000 vehicles a year. Under the now-scrapped plan, the plant’s capacity was expected to reach 54 GWh a year by 2020. Additional capacity from China was projected to raise vehicle production to 1 million units a year.
A combination of logistical problems, lower U.S. federal incentives for buyers and weaker demand for the Tesla Model 3 sent Tesla’s stock down by nearly 10% when the company reported first-quarter deliveries last month. The company is scheduled to report first-quarter financial results on April 24.
Tesla and Panasonic have invested $4.5 billion in the Nevada Gigafactory, and Panasonic was considering a further investment of $900 million to $1.35 billion before the delay was revealed this morning. Tesla’s battery business reportedly added more than $180 million to Panasonic’s operating losses in the Japanese company’s fiscal year that ended in March. Delays in Model 3 production made the losses worse.
Tesla stock traded down about 2.9% at $268.08 shortly before noon Thursday, in a 52-week range of $247.77 to $387.46. The consensus price target on the stock is $314.05.