TSLA Tesla Inc

By Takashi Mochizuki 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 17, 2018).

TOKYO -- Tesla Inc. has backed away from an agreement to buy all of the output from a solar-panel factory it operates with Panasonic Corp., the Japanese company said Thursday, another sign of the uncertain outlook for Tesla's SolarCity subsidiary.

Panasonic said it began making solar cells and modules at the factory in Buffalo, N.Y., in August 2017, under a deal that called for Tesla to buy the entire output for its home solar-panel business. But Panasonic said the deal was revised early this year, and since then it has been selling some of the production to other panel makers. Tesla is still buying some modules and cells from the plant as well.

Tesla said it was never obligated to buy the full output of the Buffalo plant, which it calls Gigafactory 2, and it continues to have a strong relationship with Panasonic.

"We continue to use cells and solar modules produced in Buffalo by Panasonic" in Tesla's solar products, a Tesla spokesman said. He said this was "in line with our contract, which contains no requirement of exclusivity." The spokesman added that "we anticipate using the full production capacity of Gigafactory 2 over time as we reach higher output and installation volumes."

The Buffalo factory is part of SolarCity, which Tesla acquired in 2016. Solar installations by the business have been slowing as Tesla retreats from riskier financing arrangements.

The solar business is one of many challenges on the plate of Tesla Chief Executive Elon Musk, who is facing an investigation by U.S. securities regulators over a tweet saying he had secured funding to take the electric-car maker private.

The solar business has taken a back seat as Tesla pushes to get production of its Model 3 vehicle up to speed. In early July, the company said it had achieved a long-delayed goal of assembling 5,000 of the sedans in about a week.

Panasonic's joint effort with Tesla in the solar business, first announced in 2016, builds on their cooperation for developing electric cars since Tesla's early days. The two companies jointly invested in the Gigafactory facility in Nevada, which supplies batteries for the Model 3.

Even though demand from Tesla has fallen short, Panasonic said overall demand for its U.S.-made solar-panel components remained intact because of tariffs the Trump administration placed on imported panels earlier this year. That has hit Chinese-made panels, which previously had a big share of the U.S. market.

The Osaka-based industrial and consumer-electronics conglomerate had said it planned to spend Yen30 billion ($271 million) to beef up production lines at the Tesla-owned facility in Buffalo, and on Thursday it said the plan was unchanged.

Panasonic's solar business in its home market has been losing money after the Japanese government cut subsidies and demand for panels stagnated. Analysts said the contract change with Tesla raised concerns over whether Panasonic could face similar problems in the U.S. Panasonic's shares fell 2.1% in Tokyo trading on Thursday after the Nikkei newspaper reported on the contract revision.

Corrections & Amplifications Tesla Inc. backed off an agreement to buy all the output from a solar-panel factory it operates with Panasonic Corp. An earlier version of this article misspelled Tesla's name in the headline as Telsa. (Aug. 16, 2018)

Write to Takashi Mochizuki at takashi.mochizuki@wsj.com

(END) Dow Jones Newswires

August 17, 2018 02:47 ET (06:47 GMT)

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