TOKYO/BENGALURU (Reuters) - Panasonic Corp and Tesla Inc will continue to make new investments in the U.S. electric carmaker’s Gigafactory as needed, but believe they can squeeze more out of existing resources than previously planned, Tesla said on Thursday.

The land of Tesla Gigafactory at a groundbreaking ceremony of Tesla Shanghai Gigafactory in Shanghai, China January 7, 2019. REUTERS/Aly Song

Separately, Panasonic said it was watching the demand situation in the electric car market before making any further investments in expanding the capacity of the Nevada plant.

The two companies were responding to a report by Japan’s Nikkei that said they had frozen previous plans to raise the capacity of the plant, which supplies battery packs for Tesla cars.

“Both Tesla and Panasonic continue to invest substantial funds into Gigafactory,” a Tesla spokesperson said.

“That said, we believe there is far more output to be gained from improving existing production equipment than was previously estimated.”

Giving no details of its sources, the Nikkei reported that financial issues had led the companies to rethink plans to expand the capacity of Gigafactory 1 by another 50 percent next year.

The business daily said the companies had already together invested $4.5 billion in the facility and had been planning to expand the plant’s capacity to the equivalent of 54 gigawatt hours (GWh) a year in 2020 from 35 GWh at present.

The 35 GWh capacity can produce batteries for about 500,000 electric vehicles a year, a source familiar with Tesla’s plans said, meaning that the previously planned expansion would have made the capacity enough for around 770,000 electric vehicles.

“Panasonic established a battery production capacity of 35 GWh in Tesla’s Gigafactory 1 by the end of March 2019 in line with growing demand,” Japan-based Panasonic said in an email.

“Watching the demand situation, Panasonic will study additional investments over 35 GWh in collaboration with Tesla.”

Neither company had made public their detailed future development plans for the site, although Panasonic said in October it was in talks to add to its investment and take capacity over the 35 GWh.

Tesla slid 2.8 percent on the Nasdaq Thursday, while Panasonic shares rose 2.6 percent in midday Tokyo trade Friday.

“Panasonic shares have been dragged down by various Tesla woes,” Masayuki Otani, chief market analyst at Securities Japan. “Turning cautious about further investments is good for Panasonic. It helps the company reduce the influence of Tesla.”

Panasonic is the exclusive battery cell supplier for Tesla, which in turn is Panasonic’s biggest electric vehicle battery client.

In February, Tesla said it had agreed to buy U.S. energy storage company Maxwell Technologies Inc, sending shares in Panasonic lower.

Tesla Chief Executive Officer Elon Musk also said in November the U.S. company would manufacture all its battery modules and packs at its new Shanghai factory and planned to diversify its sources.

The Nikkei report said Panasonic would also suspend its planned investment in Tesla’s new Shanghai plant and would instead provide technical support and a small number of batteries from the Gigafactory.

The Japanese company said in October it would prioritize building additional capacity at the Gigafactory over China.

Lower-than-expected car deliveries by Tesla in the first quarter spooked stock and bond investors earlier this month, adding to Wall Street’s concerns about its future cashflow.

Tesla is expected to report first-quarter earnings on April 24.