Net profit fell 4.5% on-year to 113.6 billion yen (US$1 billion) in the six months to September at the Osaka-based company, which supplies battery cells to Tesla.

Panasonic has partnered with the US innovator as well as local carmakers as it explores ways to expand beyond its mainstay electronics operations.

The Japanese firm jointly produces lithium-ion batteries with Tesla at a “gigafactory” in the United States.

Car battery sales grew strongly but ramp-up expenses for the automotive battery plant increased, it said.

Operating profit edged down 0.7% to 195.2 billion yen while sales increased 3.9% to four trillion yen.

Fixed expenses increased and raw materials costs rose sharply, eating into profits, the company said.

Panasonic left unchanged its full-year forecast, which sees net profit climbing 5.9% to 250 billion yen with sales rising 4.0% to 8.3 trillion yen.

A week ago, Tesla reported a “historic” profitable quarter driven by demand for its Model 3 aimed at the mass market.