While reporting Panasonic’s latest financial results, Chief Executive Kazuhiro Tsuga commented about the company’s growing partnership with Tesla. Tsuga warns that Panasonic could have problems aligning its production capacity with Tesla’s demand for batteries without more investments.

Panasonic cut its profit guidance and cited further investments in battery production capacity as one of the main reasons why the company doesn’t expect to make as much money as expected in the short-term. When explaining the reason for those battery investments, Tsuga mentioned Tesla (via Reuters):

“Demand would soon exceed our production capacity if Tesla’s sales go smoothly,”

Earlier this year, Panasonic confirmed that it plans to invest $1.6 billion in the Tesla Gigafactory, but a company official also said that encouraged by the demand for the Model 3, they are ready to move up their investment schedule if asked by Tesla.

Tesla accelerated its plans for the factory by two years and now plans for battery production to reach 35 GWh by 2018. Panasonic produces the battery cells at the plant and has invested heavily in equipment.

If Tesla acquisition of SolarCity is approved, Tesla and Panasonic will also expand their partnership to the solar industry. Very similar to the deal with the Gigafactory 1, Panasonic would make the solar cells that will go in Tesla/SolarCity’s solar products, including its new solar roof solutions.

While Tesla plans to buy all of Panasonic’s battery cell output at the Gigafactory to put in its own battery packs on site, Panasonic also sees demand from other automakers:

“We are seeing strong demand for EV (batteries) not just from Tesla but various other automakers. We see the rechargeable battery business as the biggest growth driver. So we are aggressively making upfront and strategic investment here.”

Yesterday, we reported on recent progress made at the Gigafactory ahead of the expected production ramp up: Tesla Gigafactory: stunning new 360 image of ‘Gigafactory 1’ shows progress ahead of production ramp up

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