The Panasonic booth during the 2020 CES, in Las Vegas, Nevada, on Jan. 7, 2020.STEVE MARCUS/Reuters
Panasonic Holdings, which supplies Tesla TSLA-Q, said on Monday it had cut automotive battery production in Japan in the September quarter and shrank the division’s annual profit forecast by 15 per cent, underscoring a global 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 U.S. 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 per cent in the second quarter versus the prior three months as it sought to normalize inventories, Umeda said.
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 optimize 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 U.S. 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.