Panasonic Corp on Wednesday said that will be ending production of solar batteries at Tesla's New York facility, thus bringing an end to a four-year-long partnership. Panasonic's decision to end the deal could jeopardize the electric carmaker's solar business. Tesla, however, said that it won't be affecting the company's current operations.

Reportedly, the deal between Panasonic and Tesla didn't pan out exactly as planned and the decision to end production of solar cell is an outcome of that. Moreover, Panasonic's decision to end the partnership comes just a few days ahead of a schedule event by Tesla's CEO Elon Musk at it New York Gigafactory 2.

Strained relationship

panasonic
Reuters

Panasonic's decision to pull out of the partnership is another example of souring relationship. The announcement also brings to an end Panasonic's status as Tesla's exclusive battery supplier. This could possible pose problems for Tesla, which is ramping up production in all its three facilities following growing demand of its vehicles.

Panasonic and Tesla had struck a deal four years ago to produce solar cells. Tesla named the facility in New York Gigafatory 2 and the two started production of solar cells in 2017 after Panasonic made significant investments that included paying for part of the equipment at Gigafactorty 2.

Panasonic was to manufacture solar cells which were to be used by Tesla to make its own solar panels. However, Tesla presently uses China-made cells in its Solar Roofs. The news, which first appeared in Nikkei Asian Review, says that Panasonic was selling the cells made in Gigafactory 2 to other clients, thus straining the relationship between the electric carmaker and the Japanese tech giant.

Panasonic has been struggling for a while now. The company is trying to bounce back by divesting its loss-making businesses and is making an effort to transform into a components maker from a consumer electronics maker.

What next for Tesla?

tesla loses to general motors
Tesla Reuters

Panasonic will stop production by the end of May and exit Gigafactory by the end of September, the company said. This could significantly affect Tesla given that Panasonic so long was the exclusive battery maker for Tesla's cars.

Tesla has informed New York, that Panasonic's exit won't be affecting its "current operations", the state said in a statement. Gigafactory 2 has around 1,500 employees. Panasonic, however, has said that it will continue its joint venture with Tesla in Nevada, where the company produces automotive battery.