Asia’s EV wars will power down Panasonic

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Japanese stocks have more than doubled from their 2020 low. In a record-breaking rally, an easy pick would surely be a company that is a key Tesla battery supplier and usually a foreign investor favourite. But Panasonic has instead been one of the worst-performing companies in the electronics sector in the past year. That power down looks set to last.

Panasonic is down more than a fifth over the past year despite a record net profit of Y443bn ($2.8bn) for the year to March. Just three months ago, it was reported to be considering adding production capacity in the US, where a record 1.2mn electric cars were sold last year. It had aggressive sales growth targets in place.

That has not been enough to convince pessimistic investors, with the stock trading at less than 9 times forward earnings, less than a fifth the levels of South Korean peer LG Energy Solution.

Part of that is due to an unexpected slowdown in global electric vehicle sales. The growth rate of EV sales in the US, Tesla’s biggest market, has slowed for two consecutive years since 2021. Panasonic warned last year that it would reduce EV battery production at domestic factories. It has said it is no longer aiming to triple revenue and quadruple production capacity of EV batteries by fiscal 2030 as it had previously pledged.

But the bigger let-down has been Europe. In Germany, the government cut heat pump subsidies last year, resulting in a sharp slowdown in new heat pump sales. Heat pump sales in 14 European countries fell last year, reversing a decade-long trend of rapid growth. Sales of heating systems in Europe had been a big growth driver for Panasonic during this period, leading to heavy investment in production facility expansion in the region.

There are hopes that Panasonic will find growth at home, still a relatively untapped market for EV batteries. But the problem is that while its position as an EV battery maker was strong — Tesla’s sole battery supplier globally at one point — it is now up against unprecedented competition from Chinese rivals. These rivals are trying to overcome excess capacity at home that resulted from years of overinvestment. They are becoming a fast-growing presence in Japan.

EV batteries were Panasonic’s answer to deteriorating profits and overcapacity from overinvestment in plasma TVs. A recovery requires it to find yet another solution.

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