Panasonic takes cautious approach with Tesla as EV market proves a boon for one ASX listed company
This is an older exclusive article for FinFeed subscribers which is now opened up. If you'd like to see new exclusive articles every week, please subscribe to our newsletter.
Just as Tesla begins to lease out its Model 3 sedan in the US, in a financing option that would increase its customer base, comes news that both Tesla and Panasonic had frozen previous plans to raise the capacity of the electric vehicle manufacturer’s Gigafactory.
The Gigafactory supplies battery packs for Tesla cars and Panasonic is the exclusive battery cell supplier for Tesla, which in turn is Panasonic's biggest electric vehicle battery client.
"Both Tesla and Panasonic continue to invest substantial funds into the Gigafactory," a Tesla spokesperson said.
"That said, we believe there is far more output to be gained from improving existing production equipment than was previously estimated."
Together, companies have invested US$4.5 billion in the facility and according to Reuters had been planning to expand the plant's capacity to the equivalent of 54 gigawatt hours (GWh) a year in 2020 from 35 GWh at present.
Investment in the Gigafactory will continue as needed, but the companies believe they can squeeze more out of existing resources than previously planned.
The 35 GWh capacity is said to be able to produce batteries for about 500,000 electric vehicles a year. Previously planned expansion by Tesla and Panasonic would have lifted the capacity to around 770,000 electric vehicles.
"Panasonic established a battery production capacity of 35 GWh in Tesla's Gigafactory 1 by the end of March 2019 in line with growing demand," Japan-based Panasonic said in an email.
"Watching the demand situation, Panasonic will study additional investments over 35 GWh in collaboration with Tesla."
Smart fiscal management would be music to the ears of both companies’ shareholders as Panasonic seems to be taking a far more cautious approach to its dealings with Tesla.
"Panasonic shares have been dragged down by various Tesla woes," said Masayuki Otani, chief market analyst at Securities Japan. "Turning cautious about further investments is good for Panasonic. It helps the company reduce the influence of Tesla."
As an example of Tesla’s influence, its announcement in February to buy US energy storage company Maxwell Technologies Inc. sent shares in Panasonic lower.
Fortunes have reversed since then. Panasonic’s shares rose 2.6% by midday Friday, while Tesla’s dropped 2.8% on Thursday this week.
Meanwhile, lower-than-expected car deliveries by Tesla in the first quarter hurt everyone, with stock and bond investors being spooked, adding to Wall Street's concerns about its future cashflow.
A report by daily news producer Nikkei suggested Panasonic would also suspend its planned investment in Tesla's new Shanghai plant and would instead provide technical support and a small number of batteries from the Gigafactory.
However, it’s not all bad news out of the Tesla factory.
On a positive note, the company said all of its cars would now come with the autopilot feature, a feature that was previously optional.
The company needs to continue to innovate as other car manufacturers increase their own production in the EV space.
Several Australian ASX listed explorers are looking to cash in on this increase in demand.
When the lithium boom first made headlines, several companies were playing off the Tesla momentum. Today, there are myriad options for partnerships.
Just today, Infinity Lithium Corp entered a deal with AEDIVE (the Spanish business association for the development and promotion of electric vehicles) to support development EVs in Spain.
Shares of Infinity Lithium Corp rose as much as 4.4% to A$0.094, their highest since June 7, 2018 on the back of the news.
Infinity Lithium is one to watch with its stock rising 38.5% this year.
Infinity’s CEO and managing director Ryan Parkin said: “This is another example of the rapidly evolving recognition of the importance of battery chemicals within Europe, and the momentum gathering within the EU to address a significant risk to their burgeoning auto industry.
This is just one example of the movement in this area, but Tesla, the pioneer in this space, better start improving its performance, lest it become an also-ran.
S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.
Conflict of Interest Notice
S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.
The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.