Tokyo, Japan – In a recent announcement, Panasonic Holdings, a key supplier for Tesla (NASDAQ:TSLA), revealed that it has taken measures to scale down its automotive battery production in Japan during the third quarter of 2023. This decision was accompanied by a significant downward adjustment in the division’s annual profit forecast, amounting to a 15% reduction. This development underlines a growing global trend of decelerating electric vehicle (EV) sales.
Panasonic (OTC:PCRFY) has revised its full-year operating profit outlook for its energy unit, which is responsible for producing batteries utilized by Tesla and other major automakers, down to 115 billion yen (approximately $769 million) from the previous forecast of 135 billion yen.
In an official statement, the company explained that the adjustment in automotive battery production in Japan during the three months ending in September was initiated to align with an “appropriate inventory level” in light of the rapidly decreasing demand. This strategic move reflects the broader industry’s response to a slowdown in EV sales, which has been observed in key markets, including China and Europe.
To provide further insights into this development, Panasonic’s Group Chief Financial Officer is scheduled to conduct a detailed briefing on the second-quarter earnings, commencing at 0900 GMT on Monday.
The root cause for the battery unit’s production decline in Japan was attributed to a waning appetite for high-end EVs in North America, as indicated in the company’s presentation materials. Panasonic identified the U.S. Inflation Reduction Act as a contributing factor that led to shifts in consumer demand.
However, the company also emphasized that production at its North American facilities remained stable, and there were strong sales of vehicles eligible for tax credits, which helped mitigate the broader industry slowdown.
This announcement comes in the wake of South Korean battery manufacturer LG Energy Solution’s recent warning of slowing revenue growth in 2024 due to global economic uncertainties affecting the outlook for EV sales. Furthermore, Tesla’s CEO, Elon Musk, expressed caution regarding the expansion of EV production capacity, citing concerns about higher borrowing costs potentially hindering consumer affordability, despite price reductions. General Motors (NYSE:GM) is also making similar adjustments by delaying the launch of various EV models to reduce costs and retreating from aggressive spending in the EV product development sector.
