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PALO ALTO, USA – Tesla’s planned shift to in-house production of electric vehicle batteries has prompted investors to question the automaker’s partnership with Japanese cell supplier Panasonic.
Shares of Panasonic sank 4% in Tokyo on Wednesday compared to the pre-holiday session on Friday. The frustrated growth expectations for the Tesla business drove the fallout.
Tesla revealed Tuesday that it intends to produce 100 gigawatt-hours in battery cells by 2022, enough for 1.4 million vehicles. The volume is roughly triple what Tesla buys from Panasonic today.
“Supplies for New Tesla Vehicles [from Panasonic] it could potentially decline, “said Tang Jin, senior research officer at Mizuho Bank. This development comes as Panasonic’s business of producing batteries for Tesla is making its way to profitability after years of red ink.
Panasonic has taken a wait-and-see approach to the latest stunts from the American automaker. Previously, Tesla’s Chinese operation began sourcing batteries from South Korea’s LG Chem and other suppliers.
“It is not our intention that a single company meet all of Tesla’s demand,” said a Panasonic executive, reiterating the supplier’s stance.
Lithium-ion batteries account for approximately 30% of the costs of electric vehicles. Tesla has been busy building battery skills, including taking over Maxwell Technologies, a US team that owns proprietary electrode technology.
By relocating cell production internally and radically modifying processes related to electrode material, Tesla seeks to reduce production costs by 56% per kilowatt-hour.
Tesla CEO Elon Musk talks about the plan to make batteries in-house on Tuesday. (Screenshot from Tesla’s live stream)
This change is fueled by the push from Tesla CEO Elon Musk for a new $ 25,000 vehicle, plans he unveiled during a drive-in presentation Tuesday in front of the company’s California factory. Priced much less than Tesla’s current cheapest offering, the Model 3, which starts at around $ 35,000, the new vehicle will hit the market within three years, according to Musk.
A $ 25,000 tag price “would maintain a competitive advantage even without subsidies,” said Hiroto Suzuki, partner at Arthur D. Little.
Tesla will continue to collaborate with partners such as CATL, the Chinese super-supplier of batteries, as the electric vehicle maker seeks to retain various sources of battery cells.
In other parts of the EV market, automakers are scrambling to cut battery costs in a bid to catch up with Tesla. General Motors and LG Chem are building a battery factory in the US state of Ohio with an annual capacity of 30 gigawatt-hours, investing $ 2.3 billion in a 50-50 joint venture.
Volkswagen and Swedish battery startup Northvolt are building a 16 GWh battery plant also capitalized 50-50. The German automaker is collaborating with LG Chem, CATL and other battery makers with the goal of introducing some 75 EV models by 2029.
The race to create batteries for electric vehicles has extended to the acquisition of materials. The supply of cobalt, an essential ingredient, is expected to decline. Automakers, Apple and other consumers of the metal have reportedly begun negotiating directly with miners to ensure stable long-term supplies.
But Tesla said Tuesday that it is developing cathode materials that will not use cobalt. The automaker is committed to innovation to address the risks surrounding a key raw material. However, the level of chemical engineering required to achieve that goal makes it unclear whether the company’s plan will go smoothly.
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