E When Will Panasonic Give Up On Battery Manufacturing For Tesla?

Tesla owns a battery factory in Nevada. This factory is used for producing batteries for the model 3 and more general purpose batteries for storing electricity from solar panels. Part of the factory is used by Panasonic for producing the batteries. Tesla packages the batteries in another part of the factory.

Panasonic tries to earn back its investment with selling their batteries to Tesla via pre-negotiated purchase agreements. According to Tesla's filings these agreements result in a multi-billion off-balance sheet liability for the next couple of years.

My understanding is Panasonic and Tesla have not always been friendly towards each other in public. For example in the first half of this year Elon Musk accused Panasonic of not having installed enough capacity and Panasonic denied this. But for the rest they seem to be going along well. My understanding is Panasonic is quite flexible with the purchase obligations, as long as Tesla buys a certain minimum amount of batteries from Panasonic each quarter. Let's have a look how Tesla kept Panasonic happy so far.

Q3 and Q4 2018

So far Tesla tried to satisfy these purchase obligations by selling different variants of the model 3 and also by selling model 3 to new markets. In the third quarter of 2018 Tesla first sold the premium variants of model 3 in the US. In the fourth quarter of 2018 demand for these premium variants had largely saturated and therefore it sold a cheaper variant: the midrange. Demand for the midrange lasted only one quarter unfortunately.

Q1 2019

The first quarter of 2019 was pretty quiet because the EU had not homologated the model 3 yet. So Tesla started to sell the even cheaper and less profitable short range in the US. At the same time the first ships with model 3's arrived in the EU and China, around the end of the first quarter of 2019.

Q2 2019

In the second quarter Tesla sold model 3's in the EU and China and also benefited from demand for the short range in the US. It turned out demand for the premium variants of the model 3 in China and the EU was much lower than in the US. But together with sales of the short range in the US it was apparently enough to keep Panasonic happy.

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Disclosure: short Tesla

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