Tesla slides on report Panasonic and Tesla are freezing Gigafactory spending plans
- Tesla shares fell in early trading Thursday after a report said the electric-car maker and Panasonic were suspending plans to expand the Nevada Gigafactory.
- The two companies' reported pause comes amid mounting Wall Street concerns regarding demand for Tesla vehicles, Nikkei reported on Thursday.
- Panasonic would also suspend its planned investments in Tesla's Shanghai plant, Nikkei reported.
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Tesla shares slid 3.5% in early Thursday after Nikkei reported the electric-car maker and the Japanese electronics manufacturer Panasonic were pausing plans to expand Tesla's Gigafactory in Nevada. Mounting demand concerns on Wall Street are reportedly at the heart of the decision.
Panasonic, the exclusive battery-cell supplier for Tesla, will also suspend its planned investments in Tesla's Shanghai plant, Nikkei reported without detailing its sources.
Read more: Tesla and Panasonic may pause Gigafactory expansion plans: report
A Tesla spokesperson told Nikkei the electric-car maker would continue making new investments in Gigafactory 1. Meanwhile, Panasonic told Reuters that it will "study additional investments over 35GWh in collaboration with Tesla" depending on demand.
The two companies had initially set out to raise capacity at the Nevada Gigafactory by 50% by 2020, but "financial problems" have forced a re-thinking of the situation, Nikkei said. Tesla and Panasonic have invested $4.5 billion in the plant, Nikkei reported.
Wall Street analysts have sounded the alarm in recent months about slowing demand for Tesla's electric vehicles. The stock fell under pressure earlier this month when Tesla's quarterly delivery figures fell short of analysts' expectations.
"The direct read on Panasonic/Tesla suspending plans for Gigafactory expansion is the partners probably do not see Tesla achieving projected sales volumes, and therefore necessary battery demand," Craig Irwin, an analyst at Roth Capital Partners, said in a research note on Thursday. Irwin cut his price target on the name from $270 to $240 a share.
"We believe Tesla's vehicle sales are slow because costs are simply too high for consumers," he added.
Tesla was down 17% this year through Wednesday.
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- Tesla analysts are piling on after disappointing delivery numbers sent the stock plunging
