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Tesla’s Elon Musk cast a shadow of uncertainty about his suppliers’ sales prospects in Asia after revealing a push to cut the cost of electric vehicle batteries and underscoring the point by noting that it will eventually start producing its own cells.
Shares of LG Chem Ltd. fell as much as 5.5% in Seoul, while Contemporary Amperex Technology Co. fell 4.7% in Shenzhen and Panasonic Corp. fell 4.3% in Tokyo. The world’s top three electric vehicle battery manufacturers supply Tesla, according to Bloomberg’s supply chain analysis.
The manufacturer of the Model S, X and 3 electric cars will still need to increase the trio’s battery purchases, but he still sees a “significant shortage” starting in 2022 if it doesn’t start producing on its own, CEO Musk said in a tweet.
Speaking at the highly anticipated Tesla Battery Day event at a plant in Fremont, California, Musk also said that the company plans to make a $ 25,000 car in about three years. The substantial discount compared to the company’s cheapest model of $ 37,990 will be achieved by cutting the costs of batteries, the most expensive component of electric vehicles, in half.
Atul Goyal, an analyst at Jefferies Japan Ltd., downgraded his rating on Panasonic to underperform from hold, saying Musk’s announcements increase downside risks for the Japanese electronics maker’s unprofitable battery business.
“This is likely to put Panasonic (and other vendors) under pressure to capture until Tesla technology / process and to reduce costs, ”he said. “With added pressure to improve efficiency and / or reduce costs, Panasonic may need to increase more R&D and is unlikely to have pricing power, even if Tesla’s internal cells are not ready to replace cells from Panasonic in the immediate term. “
Shares of Panasonic are down 10% this year as the coronavirus has affected earnings in all of its lines of business. Meanwhile, CATL Ltd. shares are still up 85% and LG Chem’s have almost doubled due to high expectations for Tesla-related businesses. However, LG Chem shares have recently fallen in its plan to split its battery business, snubbing retail investors who had bought the shares on the electric vehicle issue.
Yayoi Watanabe, a spokesperson for Panasonic, declined to comment on Musk’s comments. “We value our relationship with Tesla and look forward to enhancing our partnership,” he said.
© 2020 Bloomberg
