Elon Musk: Model 3 production constrained by Panasonic battery cell capacity

After Tesla and Panasonic announced that they were freezing expansion plans for the Nevada Gigafactory, several news outlets reported that the partners had postponed expansion because of shrinking demand for Tesla’s vehicles, but to the best of our knowledge, none presented any evidence that this was the reason for the decision. Now Elon Musk says the opposite is true – Model 3 production is constrained by Panasonic’s production of battery cells.

In response to a tweet from Bloomberg reporter Tom Randall, who said, “Panasonic said it reached 35 GWh/yr capacity in March. That’s already enough to build over 500k Model 3/yr+Powerwalls—more than Tesla can handle,” Musk tweeted, “Incorrect. Pana cell lines at Giga are only at ~24GWh/yr & have been a constraint on Model 3 output since July. No choice but to use other suppliers for Powerwall/Powerpack cells. Tesla won’t spend money on more capacity until existing lines get closer to 35GWh theoretical.”

Musk clarified: “There is 35 GWh/yr ‘theoretical capacity,’ but actual max output is ~2/3. It was physically impossible to make more Model 3’s in Q1 due to cell constraints.”

Bloomberg reports that signs of tension between Tesla and Panasonic have been emerging. The Japanese have taken a cautious approach to the Californians’ plans to build another Gigafactory in Shanghai. “The growth curve envisioned by Tesla is too steep,” a senior Panasonic executive said recently.

Panasonic has been having troubles on both the financial and production sides. According to Bloomberg, the company’s “earnings are stuck in low gear while those of Sony and other Japanese peers surge ahead.” Also, Panasonic recently dispatched over 200 engineers to the Nevada Gigafactory to try to resolve problems with cell output.

Sources: Bloomberg, Nikkei

  • freedomev

    Panasonic has been saying this for yrs and Tesla has to drag them kicking and screaming to produce more for the demand.
    There is a large battery shortage coming and even if not from EVs, from storage, especially if Tesla stops gouging 150-250% profit on each one.
    With the standard 25% margin Tesla could produce Powerwalls with unlimited demand as the price drops to $200/kwh where they become widely viable.
    That Panasonic isn’t developing their own EV and storage production far beyond the pitiful amount they do, is fiscally incompetent.

  • jstack6

    I think the China GigaFactory is needed so they can adjust and see how to increase demand on the new lines. It has to be very hard to stop and adjust the existing lines when every battery is needed. They sell the utility Power Packs by the Mega Watt.

  • Jeff

    Tesla is basically telling Panasonic to pay for their own tooling / equipment at the Giga-factory, or we will go buy battery cells in China. Now that Tesla has demonstrated their ability to consume a large volume of cells, it seems absurd that Tesla would continue to foot the bill for Panasonics tooling & equipment. These cells are being a commodity, with multiple suppliers in low cost countries … there will be NO capacity issue in 1 year, in fact there will be a GLUT of over supply, and dropping cell prices … all good for EV prices.

  • dogphlap dogphlap

    Tesla has complained about limited cell supply from Panasonic for the last ten years.
    Panasonic has recently signed contracts with Honda and Toyota for the supply of Li-ion cells so it is not so surprising that Tesla is starting to cast around for other suppliers, however Panasonic do make very good safe Li-ion cells, Tesla may find it hard to get a good supply from other high quality sources like LG who are busy supplying others like GM. I think the recent acquiring of Maxwell Technologies by Tesla shows their intention of making their own Li-ion cells using some of Maxwell’s patents and production know-how. If Tesla won’t pay the market rate for Panasonic cells (pure speculation) it would be hard to blame them for not going too far out on a limb to supply Tesla. The transition from Panasonic to home grown could be rough.