Panasonic Holdings (6752.T), which supplies Tesla (TSLA.O), cut automotive battery production in Japan in the September quarter and shrank the division’s annual profit forecast by 15%, underscoring a global slowdown in EV sales. The Japanese supplier’s less optimistic outlook for its battery segment follows similar warnings by several automakers and suppliers as major economies, including China and Europe, see weaker growth.
Panasonic lowered its 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. It cited reduced uptake of high-end electric vehicles in North America, driven by changes in consumer demand patterns and prompted by the U.S. Inflation Reduction Act, as the main reason behind its shift in production plans.
In a statement, the company said it had reduced domestic output of automotive batteries by 60% to normalize factory inventories. Still, those units wouldn’t reach total capacity “any time soon.” The supplier also warned it would reduce the number of battery cells it produces for Tesla as demand has shifted to lower-priced models that qualify for U.S. tax incentives.
Despite the softer outlook for high-end EVs, Panasonic said its North American operations have maintained steady production, and sales of vehicles eligible for subsidies have remained stable. It added that the global economic slowdown, which has led to uncertainty in the EV market, could persist for some time but that the sector would eventually recover.
Panasonic’s less upbeat assessment of EV demand follows similar cautions from other industry players, with LG Energy Solution recently warning of slower revenue growth in 2024 amid the broader market slowdown. Even Tesla CEO Elon Musk has raised concerns that higher borrowing costs may limit the affordability of his company’s EVs despite price reductions.
As a leading supplier of EV batteries to a variety of automakers, Panasonic’s latest update underlines the challenging conditions facing the industry in the face of a global economic slowdown and rising interest rates. Unlike traditional carmakers, which can rely on volume to boost profits, the electric vehicle market depends on subsidies and low-interest loans, which are susceptible to the overall financial climate.
The company’s lower profit forecast for its EV business is the first time that it has revised its expectations for this year, reflecting the current sluggish global economy. In addition, Panasonic’s EV battery production is affected by a global shortage of rare earth metals needed to make lithium-ion batteries.
Tesla, the biggest customer for Panasonic’s EV batteries, has recently trimmed its production goals for multiple models as it struggles with slowing EV sales. It has also slowed the launch of new models and is cutting back on EV product spending. The automaker is trying to reduce the price of its cars to boost EV sales. The lower EV production and spending by Tesla and other automakers could further pressure the EV industry.
