Panasonic President Kazuhiro Tsuga recently discussed some details about the Japanese corporation’s existing operations with American electric car maker Tesla. According to the executive, Panasonic expects to see higher yields from Gigafactory 1 as operations get optimized, and there could be a potential upside in Model S and X demand as Tesla takes actions to make its flagship vehicles more attractive to consumers.

Tsuga’s comments about Tesla were a response to an inquiry during a Q&A session following Panasonic’s release of its fiscal 2019 financial results. Tsuga pretty much confirmed what Elon Musk mentioned on Twitter last month, stating that Gigafactory 1 is currently operating at about 24 GWh despite the facility having a theoretical capacity of 35 GWh. “For Tesla, 35 GWh initial investment has been completed already, and utilization as per Elon is maybe 24 GWh currently. This year, we want to increase this (utilization) rather significantly,” he said.

Explaining further, Tsuga noted that efficiencies in Gigafactory 1 should improve in the near future, particularly as its higher-speed production lines get optimized further. “Including the lines that have yet to start, we have three fast, higher speed lines, and when they become operational, we will see improved efficiency. And when we shifted tools, we were not really able to do sufficient verification of the facilities. We saw disruptions, and we now know the reasons. And so in June, we will start replacing the jigs, and therefore, the number of cells and the yield will improve quite a bit,” Tsuga said.

Among the improvements mentioned by the Panasonic President involved tapping into the local workforce for the Nevada Gigafactory. This, according to the executive, will ultimately lower fixed costs. Tsuga also noted that he expects the demand from Tesla to be good enough for the full capacity of its production lines on the site.

“Through the localization of the workforce, we will have fewer Japanese expats (on Gigafactory 1), and that is progressing. And we are seeing an increase in the number of lines that can be operated only by the local personnel, and that can reduce fixed costs as well. So overall, we can expect improvement. Of course, the demand from Tesla is going to be good enough for the full capacity (of our equipment), that is the assumption. Should that assumption hold, the Tesla battery business can break even this year (for Panasonic),” he added.

Particularly compelling were Tsuga’s comments about the demand for batteries used in Tesla’s flagship vehicles, the Model S and Model X, both of which utilize 18650 cells. While sales of the flagship sedan and SUV have seen a drop in recent months, the Panasonic President stated that demand for the Model S and X could increase once more, especially as Tesla takes the initiative to push the vehicle to customers. “As for Model X (and S), last quarter, we saw a decline, but Tesla is already making efforts and taking actions to revamp that demand. We’re talking with Tesla on this, and so there is upside potential there,” Tsuga said.

The comments from the Panasonic President about the Japanese corporation’s partnership with Tesla all but suggests that the two companies remain closely working with each other to improve the output of Gigafactory 1. Speculations about Panasonic moving away from its partnership with Tesla made the rounds in the media last month, fueled by a report from the Nikkei Asian Review which stated that the Japanese company is freezing its investments in the Nevada-based facility. Tesla responded to the Nikkei report when it was released, explaining that there is far more output to be gained by improving the facility’s existing lines than previously estimated. These comments seem to be in step with the Panasonic President’s recent statements.

Panasonic President Kazuhiro Tsuga’s discussion on Tesla could be accessed here (kindly skip to 33:28 in the video).