Tokyo, Japan

A slowdown in electric vehicle (EV) adoption in the United States might cause Panasonic to reconsider its plans to expand automotive battery capacity in North America. Yuki Kusumi, CEO of Panasonic, indicated this potential shift during a recent roundtable interview with reporters in Tokyo.

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Panasonic, which produces batteries for Tesla, is carefully monitoring the pace at which EVs are being adopted in the U.S. market. Kusumi stressed the need to align investment speed with EV market growth. "There's a need to control the speed of investment depending on the speed at which EVs spread," he stated.

This cautious approach suggests that Panasonic may not proceed with building a third battery plant in North America in the near future. The decision on further investments will likely be deferred until Panasonic has a clearer picture of mid- to long-term market demand and commitments from automakers.

Current and future capacity expansion

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Currently, Panasonic Energy operates a battery factory in Nevada and is in the process of constructing a second facility in Kansas. These efforts are part of a larger strategy to expand annual battery capacity to 200 gigawatt hours by March 2031. However, Kusumi highlighted that any new investments will be carefully assessed to avoid the risk of underutilised production lines.

"The one situation that should be avoided most is one where a line is not used after making an investment," Kusumi emphasised. This prudent stance underscores Panasonic’s strategy to ensure that investment decisions are backed by solid commitments from its automotive partners.

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Global trends and market dynamics

The transition from gasoline-powered vehicles to EVs has encountered obstacles globally. In some developed markets, the pace of EV adoption has slowed due to inadequate charging infrastructure. Despite these challenges, Chinese automakers like BYD are aggressively expanding their market share by introducing lower-cost electric models. These vehicles often utilise lithium iron phosphate batteries, which are more affordable compared to other battery types.

Panasonic is also closely watching its supply chain in China, especially following China's decision to tighten graphite export controls last year. This move has significant implications for battery material procurement, which could further influence Panasonic’s strategic decisions.

Decreased demand and strategic adjustments

Kusumi revealed that Panasonic has experienced a "drastic" decrease in demand for batteries from a specific car brand, leading to increased fixed costs in Japan. While he did not disclose the name of the automaker or the specific model affected, this decrease underscores the volatility and unpredictability in the EV market.

Future outlook and strategic planning

Panasonic’s cautious approach reflects broader concerns within the industry about the pace of the EV transition. The company’s decision-making process will likely involve a thorough assessment of market trends, infrastructure developments, and automaker commitments. By aligning its investment strategy with actual market demand, Panasonic aims to avoid the pitfalls of over-investment and underutilisation.

Kusumi’s remarks signal a strategic pivot for Panasonic, highlighting the importance of flexible and responsive investment strategies in the rapidly evolving EV landscape. As the company navigates these challenges, it remains committed to supporting the global shift towards sustainable transportation, albeit with a more measured and cautious approach.

Panasonic’s potential delay in expanding its battery production facilities in North America reflects the complex dynamics of the global EV market. By carefully aligning its investments with market demand and automaker commitments, Panasonic aims to sustain its leadership in the EV battery sector while avoiding the risks associated with premature or excessive investments. This strategic flexibility will be crucial as the company navigates the evolving landscape of electric mobility and strives to support the global transition to greener transportation solutions.

(Inputs from Reuters)