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Shares of Tesla fell Thursday following a report the electric car company and electronics giant Panasonic are suspending plans to expand a battery plant due to weak demand for the vehicles.

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Tesla Motors, which is led by Elon Musk, finished at $268.42, down 2.8 per cent.

Tesla and Panasonic froze a plan to boost the capacity of the Gigafactory 1 battery factory in the US state of Nevada "as concerns mount on Wall Street about weakening demand at Elon Musk's car company," Nikkei Asian Review reported.

The companies have stepped back as Panasonic's losses on the Tesla batteries deepened in the financial year that ended in March, Nikkei said. 

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Japan-based Panasonic had been seen pumping as much as $1.4 billion into the plan to boost Nevada production by around 50 per cent.

A Tesla spokesperson said, "we will, of course, continue to make new investments in Gigafactory 1, as needed. 

"However, we think there is far more output to be gained from improving existing production equipment than was previously estimated."

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Tesla directly criticized Nikkei's characterization of the situation in the subsequent email.

"We will, of course, continue to make new investments in Gigafactory 1, as needed," the Tesla spokesperson said in the follow-up statement. 

"Most importantly, contrary to what is implied in this report, our demand for cells continues to outpace supply. It remains the fundamental constraint on Tesla vehicle and Powerwall/Powerpack production."

Nikkei also reported that Panasonic will suspend planned investment at Tesla's new Shanghai plant and will instead provide technical support to the project.

Panasonic has not made announcements about partnering with Tesla in Shanghai.

Shares of Tesla have had a volatile ride over the last year as Musk has overseen the ramp-up of the company's Model 3 sedan, the company's first vehicle directed at the middle market.

Investors have at times punished Tesla due to controversies surrounding Musk, who has sparred repeatedly with US securities regulators and appeared during one filmed interview last year to be smoking marijuana. 

Company results have also been up and down. Shares were punished last week following disappointing first-quarter car deliveries.