Panasonic slumps as Tesla branches out with new battery deal

Japanese battery maker Panasonic’s appears to be feeling the direct effects of its partnership with California-based electric car maker Tesla. Just recently, Panasonic opted to cut its profit outlook for 2019 over China’s slowing economy due to the trade war against the United States. Amidst these headwinds, Panasonic’s partnership with Tesla proved to be a silver lining for the Japanese company, pushing its battery business towards profitability — the first time in three quarters.

During a briefing about its adjusted forecasts, Panasonic Chief Financial Officer Hirokazu Umeda pointed out that there have been improvements with sales and profit on its battery business over the past months. Umeda notes that much of these improvements are due to its partnership with Tesla, especially considering the upgrades that Panasonic rolled out to its battery cell lines in Gigafactory 1. Overall, Tesla’s business gave Panasonic an operating profit of 16.5 billion yen (around $150M).

“Sales and profit at the Tesla business have improved,” Umeda said, later adding that additional lines at Gigafactory 1 would be installed by the end of March. The Panasonic CFO noted that with the upcoming improvements, Gigafactory 1’s total capacity could reach 35 GWh.

While its battery business appears to be thriving under its partnership with Tesla, Panasonic’s shares were walloped on Tuesday nonetheless. The Japanese firm’s 6.5% decline on Tuesday transpired amidst news that Tesla is acquiring ultracapacitor firm Maxwell Technologies in an all-stock deal valued at around $218 million. Considering that the opportunities presented by the Maxwell acquisition are related to Tesla’s battery technology, one could almost assume that Panasonic is practically losing its exclusivity as the electric car maker’s sole battery provider.

That said, industry analysts from Japan have noted that Panasonic’s recent decline in the market is primarily due to the company’s bleak quarterly earnings and annual profit estimate, which featured a 9% cut in its operating profit outlook and a decline of 19% for Q4 2018. This was a point highlighted by Masahiko Ishino, an analyst from the Tokai Tokyo Research Center, who noted in a statement to Reuters that Panasonic’s dive in the market was mostly due to the company’s outlook. 

“The latest earnings have revealed how tough the situation is for Panasonic,” he said.  

In a way, both Tesla and Panasonic appear to be branching out in their respective battery endeavors. Apart from acquiring Maxwell and its ultracapacitor tech, Tesla is also reportedly looking to partner with local battery suppliers in China for vehicles that will be produced at Gigafactory 3. On the other hand, Panasonic appears to be doing the same thing, recently teaming up with Toyota Motor Corp to collaborate in the development and production of rectangular-shaped prismatic batteries. Panasonic is also hoping to supply prismatic batteries to carmakers such as Honda, using the technology it would be developing with Toyota.

While these updates from Tesla and Panasonic might give the impression that the two companies are starting to diverge from each other, such an idea would be inaccurate. The batteries for Tesla’s electric cars and energy storage devices built in the US, after all, are still exclusively supplied by Panasonic. That means that the Japanese company would still be heavily invested in Tesla, as the electric car maker continues the Model 3 ramp and as it raises the production of its energy products like the Powerwall 2. Considering Tesla’s product roadmap, there is a very good chance that the electric car maker’s partnership with Panasonic would last for a long time to come. 

Panasonic slumps as Tesla branches out with new battery deal
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