June 28, 2018 / 3:00 AM / in 3 months

Panasonic flags battery cell shortages as Tesla Model 3 output picks up

TOKYO (Reuters) - A pickup in production of Tesla Inc’s (TSLA.O) Model 3 cars, after earlier delays, has resulted in occasional battery cell shortages, a Panasonic Corp (6752.T) official said on Thursday in a sign Tesla is in overdrive to meet its end-June forecast.

FILE PHOTO: A 2018 Tesla Model 3 electric vehicle is shown in Cardiff, California, U.S., June 1, 2018. REUTERS/Mike Blake/File Photo

Silicon Valley tech billionaire and Tesla Chief Executive Elon Musk earlier this month said his company should achieve its 5,000 cars-per-week target by the end of June, provoking scepticism from some Wall Street analysts.

Yoshio Ito, head of Panasonic’s automotive business, told the company’s general shareholders meeting on Thursday there had been a “sharp improvement in production” that was leading to occasional battery (cell) shortages.

Panasonic is the exclusive battery cell supplier for Tesla’s current production models, producing them in Japan as well as at Tesla’s so-called Gigafactory in the U.S. state of Nevada, which Panasonic jointly operates.

It also has a joint plant with Tesla to produce solar cells and modules at a new factory in Buffalo, New York.

But tying its fortunes to Tesla’s, which has struggled with production bottlenecks, has sometimes looked like a risky bet.

A fatal crash in California earlier this year involving a Tesla car and another one in Florida last year has drawn regulatory scrutiny and hurt shares.

Tesla said earlier this month that it was cutting several thousand jobs across the company as it seeks to reduce costs and become profitable, without endangering the critical production ramp-up for the sedan, a closely watched metric.

“I wouldn’t say the delay (in Tesla’s Model 3 production) had no impact on our business, but we are in close communications with Tesla and working to steadily improve production,” Ito said.

Panasonic sees batteries as central to its plan to boost automotive business revenue to 2.5 trillion yen by the year through March 2022 from 1.8 trillion yen ($16.3 billion)estimated for this financial year.

To reduce the risk of over-relying on Tesla, Panasonic has teamed up with Toyota Motor Corp (7203.T) to jointly develop batteries for electric vehicles.

At the shareholders meeting, Panasonic Chief Executive Kazuhiro Tsuga said all solid-state batteries, next-generation batteries considered more stable, are unlikely to hit the automotive market anytime soon, even though the company was engaged in their development.

“We believe we can continue to improve performance of today’s lithium-ion batteries at least until around 2025,” Tsuga said. The commercialization of all solid-state batteries would come after that progress, he said.

Toyota is aiming to commercialize all-solid-state batteries by the early 2020s.

Reporting by Makiko Yamazaki, Writing by Sayantani Ghosh; Editing by Stephen Coates

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