Tesla shares fell as much as 4.7% to US$263.20 in pre-market United States trading yesterday.
"We will of course continue to make new investments in Gigafactory 1, as needed", a Tesla spokesman said in an e-mailed statement.
The upgrade has been deemed too costly for the benefit it would provide, and many fear that lagging demand for Tesla's Model 3, which enjoyed a huge backlog of preorders throughout 2017 and 2018, may be coming back down to earth.
So far, Tesla and Panasonic have invested US$4.5 billion in Gigafactory 1.
Panasonic President Kazuhiro Tsuga's bet on Tesla has also been a source of concern.
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Still, the news gained traction fast, after all, Nikkei is usually well-informed, and so Panasonic sent a reply: "Panasonic established a battery production capacity of 35 GWh in Tesla's Gigafactory 1 by the end of March 2019 in line with growing demand".
Panasonic has not made announcements about partnering with Tesla in Shanghai.
Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. "Turning cautious about further investments is good for Panasonic".
This deal was meant to reduce battery production costs to levels "previously unobtainable in battery cell and pack production". For the first time in a while, openings at Tesla's Palo Alto engineering and design facility have outpaced that at the company's Fremont, California manufacturing facility.
Tesla Chief Executive Officer Elon Musk also said in November the USA company would manufacture all its battery modules and packs at its new Shanghai factory and planned to diversify its sources. The plan is said to have the capability to produce more than 500,000 electric vehicles per year.
The report about moderated expansion plans for Gigafactory 1 comes a week after Tesla reported lackluster vehicle deliveries numbers for the first quarter of 2019.