Japanese technology corporation Panasonic (OTC:PCRFY), Tesla (NASDAQ:TSLA)'s long-term battery collaborator, has announced a significant 60% reduction in its domestic electric vehicle (EV) battery production, which accounts for approximately 20% of its global total. This decision was influenced by diminished demand for high-end EVs and was disclosed during their recent financial report on Monday.
Several production lines have already been halted to diminish existing battery reserves. CFO Hirokazu Umeda anticipates this reduction will likely continue until March 2024. The impact of this slowdown on the broader EV production and supply chain remains uncertain. Earlier in the year, Panasonic pledged to supply batteries to Mazda and Subaru (OTC:FUJHY) later in the decade. Despite this cutback, Panasonic's American facilities, which produce cells for Tesla's Model 3 and Model Y in Nevada, are not planning to increase their output.
Despite announcing a cut in Japanese EV battery production due to reduced consumer demand, Panasonic saw a 1% increase in overall sales to 476 billion Yen ($3 billion), largely thanks to US customers utilizing the tax credit from the US Inflation Reduction Act. Increased fixed costs, potentially linked to a mineral scarcity such as graphite used in EV battery anodes and South Korea's reported shortage due to China's updated import controls, add to the challenges.
However, signals coverage from GlobalData's Thematic Engine shows growing discussions about geopolitics, critical minerals, and green energy transition since 2018. Countries including Sweden and the UK aim to ban petrol and diesel vehicles by 2030, using battery-powered EVs as policy levers for lower CO2 emissions.
Despite a dip in vehicle purchases due to the COVID-19 pandemic in 2020 and 2021, GlobalData predicts that by 2028, EV production will constitute 22% of the total light vehicle market with 24 million units. Despite these cutbacks, Panasonic reported record net profits of ¥288 billion (~A$3 billion) for the first half of the fiscal year, significantly boosted by federal US subsidies for EV battery production. A portion of this profit, ¥27.6 billion (~A$290 million), was derived from US federal subsidies shared with Tesla, which are expected to add an extra ¥110 billion (~A$1.2 billion) to Panasonic's annual net profit.
InvestingPro Insights
Drawing from InvestingPro data, Panasonic's market capitalization stands at a robust $20393.92M USD, with a low P/E Ratio of 7.34 suggesting a potential undervaluation. The company's revenue growth over the last twelve months as of Q1 2024 was 11.42%, demonstrating solid financial performance despite a challenging market environment.
Two key InvestingPro Tips can provide further context. Firstly, Panasonic's strong earnings have allowed it to maintain dividend payments for 32 consecutive years, a testament to its financial stability. Secondly, despite recent setbacks, Panasonic remains a prominent player in the Household Durables industry, with its EV battery production being a significant part of its operations.
For investors seeking more comprehensive insights, InvestingPro offers an additional five tips related to Panasonic's performance and prospects. These tips, along with real-time data, form an integral part of the InvestingPro platform, designed to empower investors with the knowledge they need to make informed decisions.
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