Panasonic Forecasts Production Increase at Tesla Gigafactory

Panasonic CEO says he thinks that his company and partner Tesla are close to eliminating bottlenecks in battery production.

Tesla

Panasonic believes production bottlenecks at the massive battery "Gigafactory" it runs in cooperation with Tesla have been identified, allowing battery production to increase in support of Tesla Model 3 assembly.

Delays in the automation of the Gigafactory's battery pack production line meant that some packs had to be assembled manually, Panasonic CEO Kazuhiro Tsuga said during an earnings briefing Tuesday, notes Reuters. But the automation process will be completed soon, Tsuga said. Tesla did not respond to a request for comment.

Elimination of that bottleneck will allow the number of vehicles produced to "rise sharply," Tsuga said, without quoting a specific figure. In its latest earnings statement, Tesla said it had built just 260 Model 3 electric cars in the first quarter of production, falling far short of its goal of 1,500. The automaker blamed production bottlenecks for the low output.

Ironing out the issues with battery production is key for both Tesla and Panasonic. The Gigafactory was built largely so Tesla can achieve the economies of scale necessary to sell the 220-mile Model 3 at a base price of $35,000. That mass-market price and long range allowed Tesla to rack up hundreds of thousands of reservations over a year before the start of production, but now Tesla has to fill those orders—and then some.

Tesla CEO Elon Musk has said that he wants his company to have the capacity to produce 500,000 cars annually. That's a big leap for a company that only produced 83,922 vehicles last year, and growing pains are to be expected.

Meanwhile, Panasonic views the automotive business as its biggest chance for growth, and electric-car batteries are a big part of that strategy. The electronics giant is in the process of opening a new battery plant in China, and it's adding production lines in Japan. Panasonic and Tesla currently have an exclusive relationship, but it's not inconceivable to think the Japanese firm might court other automakers as well.

Panasonic's increased interest in automotive products represents a pivot away from consumer electronics, which has become a less-attractive business due to increased competition. At the same time, the rise of complex infotainment systems, electric powertrains, and the anticipated arrival of autonomous cars makes the automotive sector more alluring. Panasonic competitors Samsung and LG have also gotten more heavily involved in the auto industry recently.