On Thursday morning, Japan's Nikkei Asian Review reported that Panasonic has decided to stop its planned investments in Tesla's Gigafactories. The two companies had planned to boost production capacity at the US Gigafactory from 35GWh to 54GWh by 2020; that now seems unlikely. Additionally, the Japanese company has cancelled plans to invest in Tesla's Chinese production facility, which is currently under construction in Shanghai.

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The news represents a reversal of Panasonic's plans; the company recently expanded the US Gigafactory from 10 to 13 production lines to help the carmaker grow. But the growth didn't happen as Tesla's sales slumped. Although the company sells more EVs than any other OEM, its deliveries for Q1 2019 were significantly lower than the previous three months. For Panasonic, that's a real problem; even when Tesla sales were booming, Panasonic failed to see any financial benefit . By the end of Panasonic's financial year, the company made a loss of more than $180 million (20 billion) from battery production.

A Tesla spokesperson told Nikkei, "We will of course continue to make new investments in Gigafactory 1, as needed." Tesla further elaborated to Electrek that the company believes "there is far more output to be gained from improving existing production equipment than was previously estimated."

It's possible that Tesla may diversify its battery supply in the coming years. In February, it announced a plan to purchase Maxwell Technologies, which has expertise in both automotive- and utility-grade batteries, and it's possible this has also affected Panasonic's view of its relationship with Tesla. However, the completion of that deal keeps being delayed and is now not expected to take place until mid-May.

Update: Tesla contacted Ars with the following statement: "Both Tesla and Panasonic continue to invest substantial funds into Gigafactory. That said, we do believe there is far more output to be gained from improving existing production equipment than was previously estimated. We are seeing significant gains from upgrading existing lines to increase output, which allows Tesla and Panasonic to achieve the same output with less spent on new equipment purchases."

"However, we will of course continue to make new investments in Gigafactory 1, as needed. Most importantly, contrary to what is implied in this report, our demand for cells continues to outpace supply. It remains the fundamental constraint on Tesla vehicle and Powerwall/Powerpack production.”