Panasonic batteries and Tesla cars

Source: Beijing Business Daily

Author: Yang Yuehan

Like all bad marriages, the Tesla-Panasonic alliance is close to dead in name.Now Ichiro Tsuga, who is stepping down as Panasonic's chief executive, has given the company a "final piece of advice" : reduce its reliance on Tesla and focus on supplying other manufacturers.Tesla has already teamed up with Panasonic and other battery suppliers.Tesla and Panasonic may have been in the public eye, but there was another key link: a $5 billion battery "Gigafactory" in Nevada.

Ichiro Tsuga said the company needs to produce more batteries that are more compatible with other global automakers' electric cars to reduce its heavy reliance on Tesla, the Financial Times reported Thursday.

For follow-up plans and other questions, Beijing Business Daily contacted Panasonic, but as of this press, did not receive a response.But to understand Tesla's entanglement with Panasonic, start with Mr. Tsuga.

In November, Panasonic announced that Ichiro Tsuga would step down in April to become chairman after nine years at the helm.Meanwhile Yuyuki Hisumi, head of the auto business, will take over as CEO.Under Mr. Tsuga's leadership, Panasonic became associated with Tesla as the company shifted its focus from low-margin consumer electronics to batteries, factory machinery and components over the course of nine years.Previously, Tsuga has also been described as a supporter of Tesla.

This support manifests itself in many ways.Panasonic made its first investment in Tesla in 2010, but it was Mr Tsuga's presence that convinced the company to shift its focus to cars.In July 2014, Panasonic signed a "Gigafactory" agreement with Tesla and set up a joint venture to manufacture batteries in Nevada.In 2016, Tsuga also mentioned that the company would invest up to $1.6 billion to build Tesla's battery factory, which it hopes will strengthen its presence in the automotive electronics market in the future.

Notably, the plant is also at the heart of Mr. Tsuga's strategy to transform Panasonic's batteries and other businesses.And that may have been the key to Tsuga's decision to tell Panasonic to wean itself off Tesla.Despite the growing tensions, Panasonic recently confirmed that it plans to start production of the Tesla 4680 cells at the plant later this year.While the production of the 4680 cells will require new investment, Panasonic expects the partnership with Tesla to generate more revenue.

As a battery supplier to Tesla, Panasonic's investment in the Gigafactory was the only sensible choice.In 2014, Ichiro Tsuga faced Tesla with this attitude.Five years later, however, the situation has been completely reversed."Yes, of course."In September 2019, when pressed by the media about whether he regretted investing in Tesla's Gigafactory years earlier, Tsuga's response changed to this.

And interspersed in these five years, is Tesla and Panasonic's friendship and hatred.During the "honeymoon" period, when Panasonic was the sole supplier of batteries to Tesla, the company was still losing money and had negative cash flow. However, Tesla's stock price soared and its market value soared.

Tesla became dissatisfied with Panasonic.For example, in April 2019, Tesla CEO Elon Musk tweeted that the Panasonic battery production line in the Tesla Gigafactory has an annual capacity of only 24GWh, and has been limiting the production of Model 3.A month later, at a press conference, Tsuga retorted that the "high-speed production line" at Tesla's Gigafactory was not operating at full capacity.The implication is that the root cause of Tesla's lack of capacity is not Panasonic.

The two sides have also begun to disagree on price.Mr Tsuga has revealed that Mr Musk has asked for a lower purchase price many times, to which Mr Tsuga responded that if this continued, Panasonic would consider removing all its staff and equipment from the Gigafactory."That's how it works with Tesla.""Mr. Tsuga said.

The contradictions gradually intensified at a rate visible to the public.Panasonic is no longer the sole supplier of Tesla's batteries. Tesla has started developing its own batteries, while expanding its sourcing partners to South Korea's LG Chem and China's Ningde Times to support growing sales of Tesla cars.On the other hand, Panasonic also began to prepare for the future. Last February, Toyota and Panasonic announced a cooperation agreement, saying that they would set up a joint venture in April of that year to focus on the development, manufacturing and sales of vehicle square batteries.