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Panasonic Battery Unit Cuts Profit Forecast, Warns on EV Sales

The Tesla supplier dropped its full-year operating profit forecast to $769 million as a result of falling demand for luxury electric vehicles


Panasonic US battery plant
A man is reflected on Panasonic's logo at Panasonic Center in Tokyo, Japan. Photo: Reuters

 

Panasonic Holdings admitted it scaled down auto battery production in Japan in the September quarter on Monday, as it lowered its power division’s annual profit forecast by 15% amid a worldwide slowdown in EV sales.

The company’s less positive outlook for its battery segment follows similar warnings by several automakers and suppliers, as major economies, including China and Europe, see weaker growth.

The energy unit made battery cells for Tesla’s premium Model S and Model X that during the quarter came with a higher price tag than what would make them eligible for US tax credits, said Panasonic’s Group CFO Hirokazu Umeda.

“Since these are luxury cars that exceed this price, demand has fallen,” Umeda told analysts and reporters during a briefing on the company’s second-quarter financial results.

The unit slashed its output of automotive batteries in Japan by 60% in the second quarter versus the prior three months as it sought to normalise inventories, Umeda said.

 

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Panasonic lowered its full-year operating profit forecast for the energy unit that makes batteries for Tesla and other manufacturers to 115 billion yen ($769 million) from 135 billion yen on an adjusted basis.

The company was running its inventories based on the strong demand it had seen in the first quarter. “We were working to optimise inventories while closing lines, rather than completely shutting down [operations],” said Umeda.

The battery unit’s production in Japan suffered from slowing uptake for high-end EVs in North America, Panasonic said in presentation materials posted on its website, as the US Inflation Reduction Act spurred demand changes among consumers.

Panasonic said production at its North American operations remained steady, and it saw firm sales of vehicles eligible for tax credits.

South Korean battery firm LG Energy Solution last week warned of slowing revenue growth in 2024 due to global economic uncertainties affecting the outlook for EV sales.

Also this month, Tesla took a cautious stance on expanding EV production capacity, with CEO Elon Musk saying he was worried higher borrowing costs would make its vehicles less affordable for potential customers despite price cuts.

Tesla in September cut prices of Model S and Model X vehicles in the United States so that some versions qualified for government tax credits.

General Motors is also slowing the launch of several EV models to cut their costs, and pulling back on EV product spending.

 

  • Reuters with additional editing by Sean O’Meara

 

Read more:

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Panasonic to Start Building Battery Factory in US Next Month

China’s EV Battery Giant CATL Profit Eases on Slower Demand

 

 

Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.