Japan’s Panasonic Corp (6752.T) is considering pulling out of solar cell production at Tesla Inc’s (TSLA.O) plant in New York, said people with direct knowledge of the matter, raising uncertainty over the U.S. firm’s struggling solar business.
The move would come as the Japanese electronics company scrambles to divest of unprofitable businesses as its strategic shift to components from consumer electronics struggles to drive profit growth.
Panasonic will retain its automotive battery joint venture with the U.S. electric vehicle maker in the U.S. state of Nevada, which just reported its first quarterly profit after years of production troubles and delays, one of the people said.
The people declined to be identified as the matter was still under discussion. Panasonic declined to comment. Tesla was not immediately available for comment.
Tesla’s plan to manufacture solar products in New York has come under scrutiny as the company drastically scaled back the U.S. solar business it acquired in 2016 with the $2.6 billion purchase of SolarCity.
Low demand from Tesla left Panasonic sending most cells from the plant to overseas clients, instead of selling them to Tesla for its trademark Solar Roof – cells designed to look like regular black roof tiles – as initially intended.
When announcing the solar partnership with Tesla in 2016, Panasonic said it would invest more than 30 billion yen ($272 million) in the plant in the U.S. city of Buffalo. Tesla’s long-term purchase commitment from Panasonic was part of the deal.
Panasonic has already shrunk its own solar business elsewhere as it contends with competition from cheaper Asian rivals, selling its solar panel plant in Malaysia and research arm to China’s GS-Solar for an undisclosed amount last year.
The Nikkei business daily first reported the matter on Wednesday.