Tesla demand drop hits Panasonic battery division
IRA hits demand for Musk-led firm's pricier options
A slow down in demand for high-end Teslas in North America has pushed the automotive battery division of Japan's Panasonic into the red in the second quarter of its 2024 financial year (Jul-Sep '23), and caused it to revise down its profit outlook for the segment.
Forecast operating profit for Panasonic's in-vehicle energy segment was reduced from ¥135bn ($890mn) forecast in May to ¥115bn in the firm’s fiscal second quarter results.
Panasonic CEO Hirokazu Umeda Said reveals the firm slowed battery production in Japan by 60pc from the first quarter as it looked to cut inventory in line with reduced demand for Tesla Model S and Model X vehicles.
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“Up to the first quarter a very strong demand had been indicated by the customers,” says Umeda. “But we did not see that progress as planned.”
The US Inflation Reduction Act (IRA), passed in 2022, expanded an existing tax credits for clean vehicles and removed a 200,000-unit-per-manufacturer cap on sales, leading to growth in demand for EVs.
But the Tesla Model S and Model X both exceed the $80,000 threshold for tax incentives under the IRA, contributing to flagging demand for the models. Last month Elon Musk also noted that high interest rates were pushing up monthly payments for Teslas, cutting consumer demand.
Ongoing investments in its battery production facility in Japan also contributed to losses in the Panasonic division.
Panasonic is planning to maintain production at the facility at the same level in the upcoming third quarter, despite efforts by Tesla to reduce the price of the high-end models to below the $80,000 threshold and providing free installation.
“Those efforts are being made so I think we can expect some recovery going forward,” says Umeda. “Still, we do not expect big growth.”
Panasonic also has a factory in Nevada — jointly owned with Tesla — where it produces batteries for cheaper Teslas that fall under the $80,000 IRA threshold.
“We do see very strong demand for the products produced there,” says Umeda, noting that production levels at that factory had remained steady.
Panasonic broke ground on a new $4bn factory in Kansas last year that is expected to start production in 2025, and has recently confirmed it plans to build a third EV battery cell factory in the US.