Panasonic bets on bigger electric vehicle battery to wean itself off Tesla

Panasonic said it expected the development of a bigger electric vehicle battery to help the company diversify its business from Tesla, as the Japanese electronics conglomerate works to focus direction after a period of aggressive streamlining.

Yuki Kusumi, a company veteran appointed chief executive last year, said Panasonic would invest ¥600bn ($4.8bn) over the next three years, with two-thirds earmarked for EV batteries, supply chain software and air conditioners.

Kusumi said Panasonic was prioritising the development of the lithium-ion 4680 battery at its Wakayama factory in western Japan. The company plans to introduce two production lines for the battery, which has a fivefold energy capacity compared with those being used at present.

Tesla’s chief executive Elon Musk has said the 4680, which is not scheduled for mass production until next year, will help bring down the price of a Tesla car to about $25,000. Tesla’s Model 3 starts at about $41,000.

For Panasonic, the battery represents an opportunity to diversify its client base from Tesla. “If the 4680 is second to none in terms of performance and cost, manufacturers other than Tesla will eventually adopt it,” said Kusumi.

Kusumi said the investment pledge for EV batteries and other growth areas would “probably not be enough” to meet worldwide demand.

Panasonic is the world’s third-largest producer of EV batteries, behind China’s CATL and South Korea’s LG Energy Solution. It supplies mostly Tesla, but established a joint venture with Toyota in 2020.

Despite strong demand from Tesla, the Osaka-based manufacturer has been slower in building out its capacity compared with its Asian rivals. The company held back on new investment as Tesla’s Gigafactory in Nevada, in which it had invested $2bn, only started to pay off in the fiscal year ended in March 2021.

Kusumi’s plans reflect Panasonic’s desire to return to robust growth after aggressive streamlining under former president Kazuhiro Tsuga, who spent years shedding underperforming business lines, including plasma TVs the company used to be famous for.

The remaining ¥200bn for the next three years will be earmarked for technology, including hydrogen energy. The company has targeted an accumulated operating profit of ¥1.5tn, up 63 per cent from the past three-year period.

Kusumi has spent the past year turning the 104-year-old conglomerate into a holding company, which analysts said should help focus direction by improving management.

“Efforts undertaken since Kusumi took office to strengthen the operational capabilities of individual businesses have yielded some results,” said Yu Okazaki, a Nomura analyst. He said Panasonic’s cumulative ¥1.5tn operating profit target is in line with Nomura’s forecast and that the conglomerate’s focus on technology development for car batteries has ample potential for growth.

Panasonic has been beset by a global chip shortage worsened by the coronavirus pandemic. Kusumi said producers were struggling to secure chips and that the crisis was exacerbated by some companies locking in large chunks of global chip supply through long-term contracts.

He said the just-in-time inventory management system made famous by Toyota — where raw materials arrive as production is scheduled to begin — works only at “normal times”.

“We are aiming to secure multiple supply routes, secure versatile components that can be used in multiple ways and shorten the lead time so that we can be more responsive,” said Kusumi.