Tesla Inks 3-Year Deal With Panasonic, Model Y in Trouble
Tesla, Inc. TSLA has a three-year contract with Panasonic Corp. PCRFY completed, according to which the Japanese battery manufacturer will manufacture and deliver 2170 lithium-ion battery cells in its Gigafactory in Nevada.
The agreement, which runs from April 1, 2020 to March 31, 2023, covers the terms for Panasonic's production capacity commitments and Tesla's purchase volume commitments for the first two years of the contract. Tesla has also changed the terms of its partnership with Panasonic and changed the term to expire 10 years after certain production milestones have been reached.
Tesla and Panasonic started talks in May to expand the Nevada battery and power plant. The two companies saw an advantage in expanding the plant due to the increased demand for Tesla electric vehicles.
In February, Tesla and Panasonic ended their joint production of solar cells at the Gigafactory 2 facility in Buffalo, NY after years of struggling to improve the unit's performance. The companies founded the joint venture for the production of solar cells in 2016. According to the deal, Panasonic initially agreed to pay $ 271.96 million for part of the equipment at the Buffalo plant. After that, the companies started producing components for solar photovoltaics in 2017.
Tesla's relationship with Panasonic reached a difficult point last November after the latter rejected any plan to build a new battery cell factory for the former in China. It has also been suggested that Tesla can either access battery cells from Gigafactory 1 in the U.S., where Panasonic is the exclusive supplier, or simply use cells made by other manufacturers in China. In particular, Tesla with LG Chem Ltd. from South Korea signed an agreement to purchase batteries for its Gigafactory 3 in China, which will supply the company with 21,700 battery cells for its 3 and Y models.
In the meantime, Tesla seems to be facing major production problems with the current Model Y. U.S. consumers are reluctant to buy the battery-electric SUV and, in some cases, refuse delivery. The shortcomings are reported to cover a wide range of areas, including paint and trim problems, seat depressions, and a loose seat belt.
While Tesla's CEO Elon Musk has instructed the company to double its efforts to identify and repair errors when cars come off its Fremont assembly line, some are still being delivered with serious flaws.
The company currently expects 83,177 vehicles to be produced in the second quarter of 2020, including the S, 3, X and Y models, indicating a decrease from the first quarter of more than 102,000 vehicles. The more Y models returned, rejected, or recalled, the worse Tesla could get this quarter.
Zack's Rank & other stocks to consider
Tesla currently has a Zacks Rank 2 (Buy). The company's shares have risen by 137.1% since the beginning of the year compared to the 39.1% increase in the industry.
Other top stocks in the same sector are Halfords Group Plc HLFDY and Niu Technologies NIU, both of which currently have a zack rank of 2. The full list of today's Zacks # 1 (Strong Buy) Rank stocks can be found here.
Halfords' shares have risen 5.8% since the beginning of the year, while the industry declined 12.6%.
Niu shares have risen 52.4% since the beginning of the year, while the industry declined 12.6%.
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