Tesla shares fell 4.2% to US$264.45 in premarket trading on Thursday.
Panasonic has invested heavily in production facilities alongside Tesla, and as its battery partner, is considered the company's most important vendor. Tesla has seen a record decline in deliveries during the quarter ending in March, which has led to fears about lack of demand for the company's Model 3 sedan.
The two companies had not made public any detailed investment plans for the site, although Panasonic said in July previous year it would consider further investment in the Gigafactory if requested by the United States electric carmaker.
Still, experts are keeping a close eye on Tesla as it continues to demonstrate soft sales. The expansion, which was supposed to be completed by 2020 according to Nikkei, would have bumped annual battery capacity from 35 gigawatt-hours to 54.
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Tesla is disputing a Thursday report that the electric auto manufacturer is putting a freeze on its plans to expand its Nevada Gigafactory. That said, we do believe there is far more output to be gained from improving existing production equipment than was previously estimated.
Panasonic commented on the decision stating: "Panasonic will study additional investments over 35 GWh in collaboration with Tesla".
Panasonic likely wants to gauge long term demand for Tesla's highest volume vehicle, the Model 3 now that the list of pre-orders has been fulfilled, which makes sense given the Gigafactory is able to supply 500,000 battery packs per year and Tesla sold 245,000 vehicles in total in 2018. Tesla shares have declined by 17 percent year to date. "It remains the fundamental constraint on Tesla vehicle and Powerwall/Powerpack production". If Panasonic doesn't think a long upgrade cycle for its primary battery manufacturing plant in the U.S.is worth the investment, it probably has a good reason for this.
Tesla announced earlier this month that it had delivered 63,000 vehicles in its first quarter of 2019, far below analysts' expectations.