TOKYO (Reuters) – Panasonic Corp’s (6752.T) finance chief said the company is seeing strong demand for battery cells from U.S. partner Tesla (TSLA.O) and they are in talks to expand their joint plant in Nevada, which is now profitable.

FILE PHOTO: The Panasonic booth is shown during the 2020 CES in Las Vegas, Nevada, U.S. January 7, 2020. REUTERS/Steve Marcus

The positive outlook comes after production troubles and delays at Tesla strained the company’s partnership with Panasonic over the past few years.

Panasonic recently lost its status as Tesla’s exclusive battery supplier, but has been able to turn around the U.S. joint battery business as demand for Tesla’s electric cars soar.

Last month Tesla reported its third consecutive quarterly profit despite the economic impact of the coronavirus pandemic, taking investors by surprise.

“We are seeing strong demand from Tesla” beyond the Nevada plant’s current capacity of 35 gigawatt hours per year, Panasonic Chief Financial Officer Hirokazu Umeda told an earnings briefing on Monday. “We are in discussions right now” about expanding the plant’s capacity, he said.

The plant made a profit in January-March for the second consecutive quarter, he said.

Umeda hinted that Panasonic has been developing new batteries with Tesla. “We will be working to improve materials and technologies throughout this financial year,” he said.

The Tesla battery business provided a bright spot in Panasonic’s otherwise grim earnings, hit by plant closures and supply chain disruptions for its laptops, washing machines, automotive components and factory equipment.

The group’s operating profit for the year ended in March dropped 29% to 294 billion yen ($2.7 billion).

Panasonic did not issue an earnings forecast for the current year due to uncertainty about the impact of the virus, joining a number of Japanese electronics companies, including Sony Corp (6758.T) and Canon Inc (7751.T), in refraining from providing outlooks.

Analysts have forecast an average 225.46 billion yen profit for the current financial year.

The company has been cautious about expanding its partnership with Tesla, as its $1.6 billion investment in the Nevada factory, which began construction in 2014, failed to produce solid returns. It did not make a profit until the October-December quarter of last year.

Panasonic has decided to exit solar cell production at Tesla’s New York plant this year.

It also decided not to build a new battery plant for Tesla in China. The U.S. car maker has entered into partnerships with South Korea’s LG Chem Ltd (051910.KS) and China’s CATL (300750.SZ).

Umeda said at the briefing that Panasonic has been supplying batteries to Tesla’s factory in China from their Nevada plant.

Reporting by Makiko Yamazaki; Editing by Muralikumar Anantharaman and Susan Fenton

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