tesla factory

Tesla Motors Inc (NASDAQ:TSLA) is all keyed up to increase the number of cars sold each year by starting production of batteries in its own manufacturing plant. However, some investors and market watchers are still skeptical on Tesla’s strategy and sense some risks.

Key partners doubting plans

Elon Musk may hardly listen to what analysts, journalists and industry peers have to say as the company has already given a stellar performance by outperforming expectation, in the industry. But the reason of concern is that even Panasonic, who is the largest supplier of lithium-ion batteries to Tesla Motors Inc (NASDAQ:TSLA), has distant itself from the ‘Gigafactory’ plan of the EV manufacturer.

According to the reports from Bloomberg, Kazuhiro Tsuga, president of Panasonic stated that the project is perilous from the investment point of view, and much riskier than what the company expects and can afford. Tsuga said that Panasonic would like to make a step by step investment, and its battery production is depended on Tesla’s sales number, which the company is tracking closely.

These words clearly replicate the idea that big partners and suppliers of Tesla are not backing its plan at full throttle.

Another article in the Wall Street Journal citing Herald Kroger, the head of Daimler’s electric-vehicle segment said that Gigafactory plan of Tesla has some serious setbacks along with its merits. Daimler is an owner of a small share in Tesla Motors Inc (NASDAQ:TSLA) just like Toyota. Another high profile executive, Martin Winterkorn, CEO of Volkswagen said that he could not understand the idea of Gigafactory saying that Volkswagen is, also, capable of opening its own manufacturing plant as it has a string of suppliers for its needs.

Tesla needs lots of batteries

Elon Musk presented the idea of Gigafactory along with other details back, in February. Tesla needs more number of batteries, which is evident from the fact that the production rate was about 25,000 cars per year, and Tesla Motors Inc (NASDAQ:TSLA) used one-third of electric car batteries produced in the world.

Further, to increase the production of Model S and Model X by 2016 more number of batteries will be needed, which Tesla, as well as, Panasonic can achieve together. However, if Tesla takes up the production of Model E, then number of battery required will rise, further. A report from Barron stated that Gigafactory will only be profitable for Tesla if the company sells half a million car per year.