Battery maker Panasonic decreased its production of EV batteries in Japan in the third quarter, as its business shifted more towards the US owing to incentives there. And it has reduced its year-end earnings guidance for its EV battery business by 20pc, citing unfavourable market conditions.
The company’s in-vehicle energy business — which is devoted to EV batteries the firm sells to automakers — saw total sales increase “in real terms” in Q3 by 15pc year-on-year, mostly driven by US sales, albeit the company adds the caveat that this is excluding the impact of US Inflation Reduction Act (IRA) tax credits which are available to Panasonic’s OEM customers.
“If we exclude IRA impact, profit decreased year-on-year to a loss, which is a factor for the downward revision of energy [2023 guidance],” a Panasonic executive says.
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“Operating profit increased to ¥52.5bn ($346.4mn) from a year ago. This is due mainly to increased sales of EV batteries in North America and recording of the US IRA tax credit, despite decreased sales in the industrial and consumer [sector], decreased production of EV batteries in Japan and an increase in fixed costs,” Panasonic says.
And although sales and operating profit were up across Panasonic’s wider energy business, the company tells investors that it wants to maintain an adaptable strategy of demand response.
In the quarter, the company says it “adjusted production to meet appropriate inventory level, in response to rapidly reduced demand” and that “profitability deteriorated considerably, due to inability to offset impact of reduced production with fixed-cost reduction efforts”.
“Despite upward forecast for North America, decreased sales and production in Japan were “affected by demand slowdown for high-end EVs.” Demand has “shifted to models eligible for tax credit” in the US, a company earnings deck says.
As a result, the company says that in the medium-to-long term it will “expand [its] customer base for products manufactured in [its] Japan factory and expand product line-up.”
Incentives
Under the IRA, manufacturers of battery cells or other EV components are entitled to tax credits of $35/kWh of battery capacity sold. Panasonic estimates that it generates $1.3bn in these tax credits annually at Tesla’s Nevada gigafactory, which Panasonic jointly operates, and expects around $1bn in annual credits at its upcoming Kansas factory.
Construction started on the Kansas factory in February this year, with mass production of 2170 cells set to start in 2025.
Panasonic also says that mass production of the Elon Musk-championed 4680 battery cells is rescheduled to begin at Panasonic’s Wakayama facility in Japan in the second half of 2024 “so that higher-density technologies can be introduced to further enhance competitiveness”, the company says.
In April, Panasonic Energy signed a contract to supply automotive batteries for commercial vehicles in North America with Norwegian battery vehicle systems company Hexagon Purus ASA, as well as entering into separate discussions with Japanese OEMs Mazda and Subaru on establishing what the company calls “medium-to-long-term partnership[s] to supply batteries for EVs”.
Ciaran has written about finance, politics and culture. He is passionate about e-mobility and what it means for our way of life.
Ciaran has a Masters in Ancient Philosophy from Oxford University.
