Panasonic cuts profit outlook on slowing China demand
While the company blames the US trade war for shrinking business, the Tesla battery unit is a bright spot
Japan’s Panasonic cut its annual profit outlook after disappointing quarterly earnings it blamed on a slowing Chinese economy hit by a trade war with the US that hurt demand for auto components and factory equipment.
Panasonic forecast an operating profit of ¥385bn for the year ending March, down from the previously predicted ¥425bn and missing the ¥420.25bn average of 18 analyst estimates polled by Refinitiv.
“Demand for mechatronics, mostly motors, has plunged since November as our clients making equipment for smartphone factories cut their investment,” Panasonic CFO Hirokazu Umeda said at a briefing.
China’s shrinking car market has crimped demand for automotive components, Panasonic said, while sales have also dropped for electronic devices used in air conditioners.
Panasonic’s operating profit for the October-December quarter fell 19% to ¥97.6bn, far below the average ¥122.35bn estimate of eight analysts.
The energy division, which includes its battery business with US electric carmaker Tesla, provided some good news in a bleak quarter, posting its first operating profit in three quarters.
“Sales and profit at the Tesla business have improved,” Umeda said of the division’s ¥16.5bn operating profit.
He said additional lines at Tesla’s “Gigafactory” battery plant in Nevada would be installed by the end of March, bringing the plant’s total capacity to 35 gigawatt hours.
Panasonic, the exclusive battery cell supplier for Tesla’s production models, saw its profits squeezed early in 2018 by the US electric vehicle maker’s initial production delays for the mass-market Model 3 sedan.
Tesla expressed optimism last month that it would post profits in every quarter in 2019, but the winding down of a US tax subsidy this year is expected to make Tesla cars more expensive and could hurt sales.
Umeda said a decision had not been taken yet on how Panasonic would supply battery cells for Tesla’s new Shanghai car factory. Tesla has been in discussions with other suppliers, including China’s Tianjin Lishen.
“We have production sites for cylindrical batteries in the US, Japan and China,” Umeda said. “We are in the process of analysing where would be the best to supply batteries.”
To reduce its heavy reliance on Tesla, Panasonic has teamed up with Toyota Motor to jointly develop and produce thin, rectangular-shaped prismatic batteries, a type different from the cylindrical batteries used in Tesla electric vehicles.
Panasonic plans to supply prismatic batteries to its existing customers such as Honda Motor through the Toyota joint venture.
“We are aiming to develop the best batteries in the industry that would be wanted by a wide range of carmakers,” Umeda said.