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Panasonic Corp reported higher operating profit boosted by cost cuts and an improvement at the joint battery business with Tesla Inc. However, despite good results, Panasonic stock price is moving down.
Panasonic Corp reported on Monday its first quarterly profit in U.S. battery business with Tesla Inc. The news comes after the U.S. electric vehicle maker reported its second successive quarterly profit last week, as vehicle deliveries hit a record. Tesla also said it would comfortably make more than half a million units this year, pushing its shares to new highs.
Panasonic’s Chief Financial Officer Hirokazu Umeda said, referring to battery cell production, that the company is catching up as Tesla is quickly expanding production.
“Higher production volume is helping to push down materials costs and erase losses.”
Panasonic first endowed in Tesla back in 2010. That was the year when the two companies disclosed their partnership through which they’ve planned to make the U.S. firm’s Gigafactory plant in Nevada in 2014. The factory came as part of Panasonic’s strategic change from low-margin consumer electronics to automotive components.
Tesla ‘Betrayed’ Panasonic
However, it happened that the $1.6 billion Gigafactory investment didn’t quite return results as it was expected and Panasonic became pretty vigilant when it comes to its battery business with Tesla.
Therefore, Panasonic chose not to build a new battery plant for Tesla in China, surrendering its battery cell monogamy as Tesla entered into a partnership with South Korea’s LG Chem Ltd and China’s CATL.
It was hard times for both companies since Panasonic was always acting as a main supplier since the days of the original Tesla Roadster.
However, two companies were constantly arguing over the cost of the battery cells, the timeline to ramp up production, and “culture”.
“With hundreds of thousands of employees, Panasonic was used to giving its units autonomy to solve problems. Those units might move slowly, seeking Japanese-style consensus, but they didn’t have to kick everything up to the executive suite in Osaka.”
‘If Tesla Wins – Panasonic Wins’
Umeda then stated that the company will focus on demand at Gigafactory for Model 3 and Model Y. With the last days of December last year, the problems finally started to resolve.
To build its team, Panasonic recruited chemical engineers from non-battery sectors and trained them to handle lithium-ion batteries. Now it has 3,000 people who operate the machinery and about 200 technical assistants from Japan to keep the plant running 24 hours a day, 365 days a year.
Allan Swan, the head of Panasonic’s US battery manufacturing unit based inside the Gigafactory then said there was no barrier between the two teams working inside the factory.
“Our whole job is to make sure that Tesla wins. If Tesla wins, Panasonic wins.”
Panasonic Turns to Toyota for EV Batteries Production
Meanwhile, Panasonic turned to Toyota Motor Corp for battery partnership, setting up a joint venture for electric vehicle (EV) batteries in April.
The company said operating profit for the October-December quarter rose 3% to 100.4 billion yen ($915 million). That was 49% better than analysts were predicting.
The company kept up its profit forecast for the year through March at 300 billion yen, above an average estimate of 295.14 billion yen by 20 analysts.
The new company, dubbed Prime Planet Energy and Solutions, will develop prismatic, or square-shaped, batteries that will be available to any automaker. It will begin with its work on April 1 with more than 5,000 employees. Toyota will keep 51% and Panasonic will have the remainder. It will begin operations on April 1 with more than 5,000 employees, with Toyota owning 51% and Panasonic holding the remainder, the pair said.