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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.
Amid the euphoria of a robust first quarter, Panasonic has decided to maintain its full-year profit predictions.
Japanese electronics giant, Panasonic Holdings Corp (TYO: 6752) renowned for its diverse product portfolio has recently reported a stellar Q1 profit performance.
According to reports, the company’s operating profit came in at an impressive 90.37 billion yen ($637 million), showcasing a remarkable 42% rise in the three months ending June. This result was just slightly lower than the 91.18 billion yen average predicted by analysts according to a Refinitiv survey.
The modest difference between actual and forecasted outcomes illustrates the challenges and uncertainty that businesses encounter in an ever-changing economic landscape.
The Force Behind the Panasonic Q1 Profit Increase
One of the crucial factors that contributed to Panasonic’s impressive financial performance in Q1 was the depreciation of the Japanese Yen.
As an international conglomerate with widespread operations, Panasonic exports its products worldwide. A weaker Yen makes its goods more attractive and affordable for foreign buyers, consequently boosting export revenues and driving up profitability.
The company’s automotive and energy divisions have also played a pivotal role in this success. Panasonic’s involvement in the development and supply of batteries for Tesla Inc (NASDAQ: TSLA) has been a significant driver of its revenue growth in recent years, especially as the demand for Electric Vehicles (EVs) continues to surge worldwide.
Meanwhile, Panasonic’s battery unit, Panasonic Energy, recently announced the initiation of talks with Subaru to establish a battery supply partnership. The collaboration aims to provide cylindrical lithium-ion batteries to Subaru for their electric vehicles.
Simultaneously, its renewable energy products, including solar panels and energy storage systems, have witnessed rising demand as countries strive to embrace clean energy alternatives.
Panasonic Is Maintaining Profit Projections
Amid the euphoria of a robust first quarter, Panasonic has decided to maintain its full-year profit predictions, a move that underscores the company’s confidence in its future performance.
The company said its full-year profit expectation remains at an astonishing 430 billion yen. The company’s commitment to this ambitious target has garnered attention, as it exceeds the average profit forecast of 413.96 billion yen predicted by a poll of 20 analysts by Refinitiv.
The company’s diverse product portfolio, ranging from consumer electronics to delivery robots, sensing cameras, and self-checkout systems, has played a crucial role in sustaining its business resilience. Panasonic’s ability to adapt to shifting market demands and capitalize on various industries’ growth opportunities contributes to its confidence in achieving its ambitious financial targets.
Furthermore, Panasonic’s battery division has set lofty targets for the EV battery market, with plans to construct four new plants to reach a significant increase in annual capacity by 2031.
With its determined approach, Panasonic is poised to achieve its financial targets and solidify its status as a global leader in the electronics and electric vehicle battery sectors. Investors and stakeholders can look forward to witnessing the company’s strategic vision unfold as it continues to pave the way toward a more sustainable and technology-driven future.
Benjamin Godfrey is a blockchain enthusiast and journalist who relishes writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desire to educate people about cryptocurrencies inspires his contributions to renowned blockchain media and sites.