By
Svetlana Soroka
April 18th, 2024
As a result of all the challenges faced by Tesla, its long-time partner Panasonic is also bearing losses. It has lowered its full-year operating profit forecast for its battery unit to ¥115 billion ($771 million) from ¥135 billion, as the demand for Tesla EVs in North America slowed down.
Shares of Tesla Inc (NASDAQ: TSLA) have dropped by 4.79% on Monday following the news about its major battery supplier Panasonic Holdings Corp (TSE: 6752.T) slashing its domestic electric battery production by as much as 60%. The Japanese electronics giant explained the downgrade by slower than expected sales of some models to Tesla.
As we reported, for the third quarter of 2023, Tesla missed Wall Street revenue expectations, delivering $23.35 billion whereas analysts’ forecast was $24.1 billion. Besides, its deliveries fell to 435,059 in Q3, declining from Q2’s record of 466,140 and missing the consensus of around 455,000. Model 3 and Y deliveries totaled 419,074, with most of that being the Model Y. Model S and X deliveries dropped to 15,985. Tesla’s production tumbled to 430,488 in Q3 from Q2’s 479,700, amid factory upgrades and an effort to slash inventory.
Tesla CEO Elon Musk has also tempered expectations about the upcoming Cybertruck model, saying that it could take up to 18 months before the Cybertruck begins to contribute a significant positive cash flow.
As a result of all the challenges faced by Tesla, its long-time partner Panasonic is also bearing losses. Firstly, Panasonic cut automotive battery production in Japan as more expensive Tesla models like the Model S and Model X are not that popular among the drivers. The company aims to achieve an “appropriate inventory level, in response to rapidly-reduced demand”. The reduction will likely last at least until March 2024. Secondly, Panasonic has lowered its full-year operating profit forecast for its battery unit to ¥115 billion ($771 million) from ¥135 billion, as the demand for Tesla EVs in North America slowed down.
Despite some shortcomings in production, Panasonic is expecting a recovery.
Panasonic’s CFO Hirokazu Umeda commented:
“I think we can expect some recovery going forward. Still we did not expect big growth like what we see in the US plant. So we’ll be running the Japan factory based on that assumption.”
Currently, Panasonic is considering setting up a potential third factory in the US, the decision will be made by March 2024. In addition, the company is planning to quadruple its global EV battery production capacity by 2031.
In the US, the production levels remain the same as Tesla will push its more affordable Model 3 and Model Y cars. One of the reasons is that higher-priced EVs may not qualify for tax breaks or other incentives from government programs. Last year, EV manufacturing was impacted by the Inflation Reduction Act (IRA) signed by President Joe Biden on August 16. The IRA laid the foundation for a more sustainable, equitable, and secure transportation future. As investing in a more diverse global EV supply chain can lower battery costs and help people worldwide plug into clean transportation, IRA brought more stability that the US EV market lacked.