Panasonic and Tesla announced they were halting expansion of Storey County’s Gigafactory earlier this month. With weak demand for Tesla vehicles and Tesla’s unmet production commitments, the Japanese manufacturer has effectively pulled the plug on future growth in Storey County.
Both Tesla and Panasonic planned to increase capacity at the Gigafactory 50% by 2020. Panasonic had planned to invest up to another $1.35 billion at the Gigafacory. However, with the erratic behavior of Elon Musk and dropping Tesla sales, Panasonic will cut its losses in Storey County.
This move could spell continued tough sledding at Storey County’s Community Development Department. Gary Hames was frogmarched out of the office a week ago. The County has said exactly nothing on Hames’ departure. The Tesla/Panasonic freeze represents a huge potential loss of revenue for Community Development. Combined with the prospects of having to return hundreds of thousands of dollars in overcharges Hames may have made during his tenure, things could be less that rosy at 110 Toll Road.
Tesla’s sales dropped 30% in Q1 of 2019 and posted a loss of $710 million. Tesla is on pace to open a Gigafactory in Shanghai at the end of the year. But they still have not raised capital to build the new lines required for their much heralded new products. The Semi, Pickup and Model Y appear to each need separate production lines. Those production lines could cost over a billion dollars each.
Sales and Profit Vanish As Taxpayer’s Crutch Removed
It is widely believed that the Model 3 is a break even or perhaps even a money loser in the lowest priced configurations while the higher priced Model X and S are profitable. Tesla’s of the Model X and S dropped 50% last quarter while Tesla’s overall sales dropped 30%
This drop is due in part to the fact that Tesla has met the threshold set by the Federal Government for taxpayer subsidies on Tesla’s cars. Federal Guidelines slash the $7500 tax rebate on EV’s from a particular manufacturer once that company sells 200,000 vehicles. Tesla sold over 200,000 vehicles in 2018. Taxpayers will give Tesla buyers $3750 from January to June this year and give them $1875 from July through the end of 2019 when the tax breaks will go to zero.
But the sales drop could also be the reality of Tesla itself. Early this year Tesla announced it would shutter nearly all their showrooms. Weeks later the walked the announcement back while raising prices. Elon Musk continues to make statements that the SEC considers manipulating the stock performance. And then there is the whole “pedophile” nonsense. If Satya Nadella or Mary Barra of GM made similar moves, they would get the Gary Hames frogmarch treatment within nanoseconds of such irresponsible behavior. But not Elon the Magnificent
While Elon Musk is running buck wild in the mosh pit, Panasonic remains the adult at the Gigafactory. By stepping back from Tesla and hedging it’s bets with Toyota and other “dinosaur” automotive manufacturers, Panasonic will likely salvage their battery division. Over 20 “dinosaur” companies have or will release electric vehicles by the end of 2020.
While all of this sounds ominous, it could get even worse. I have heard whisperings that Panasonic may pull the plug completely and write off more that $2 billion. If they do that, Tesla would be effectively sunk.
This story will continue to develop.