Panasonic, a key supplier for Tesla, urged to boost production and delivery of American-made batteries to meet rising demand
Revamped Rewrite:
In a scoop for foreign media, the CEO of Panasonic, Yuki Kusumi, spilled the beans that the company's main client, widely assumed to be Tesla, is urging Panasonic to expedite proceedings at their new battery plant in Kansas, as Chinese-manufactured batteries face increased tariffs and subsidies.
Kusumi candidly admitted the rush to get Kansas online, a plant that has been under construction since 2022 and is due for completion next year, is driven by Tesla's desperation for a swift supply of EV batteries to fuel its American expansion.
"Our customer has been vocal about the need for a quicker start to production at Kansas," Kusumi shared during an interview in Tokyo. He postulated that making the switch from Chinese to U.S.-made Panasonic batteries would help Tesla's electric vehicles sold domestically qualify for substantial consumer tax credits.
The De Soto, Kansas plant, when it reaches mass production by March 2027, will be Panasonic's second battery site in the United States and will raise the company's production capacity by 60 percent.
Although Kusumi chose not to explicitly name Tesla, it's common knowledge that the Japanese electronics giant has long had a substantial client in Tesla, partnering with the auto giant to set up the Nevada Gigafactory that propelled Elon Musk's car group to global EV dominance.
The push to bring Kansas online buckes the trend of battery and EV plant delays across the auto sector due to slowing sales growth for electric cars. However, the strategic importance of localizing battery production in response to trade issues, such as tariffs, appears to be overriding longer-term concerns.
In fact, Tesla previously opted for a low-cost version of its Model 3 with a Chinese battery, but discontinued the model last year due to the Inflation Reduction Act, which does not offer subsidies for cars with foreign-made batteries. Tesla often evades disclosing the origin of batteries for individual model variants, but it's evident that the U.S.-based automaker has leaned heavily on domestic batteries for vehicles sold domestically.
The increased demand for EV batteries in the States has also been soured by recent fires involving specific automaker vehicles, which Kusumi alluded to, as well as incidents of Tesla vandalism in the U.S. in protest of Elon Musk's controversial leadership during the Trump administration.
Despite these challenges, Panasonic remains optimistic about continued strong demand for batteries from its major North American client. However, the company has suffered in comparison to Chinese and Korean competitors since it heavily bet on Tesla during the fledgling stage of electric vehicle adoption, sometime around 2016.
Yet, the opening of a Japanese battery plant in Wakayama last year and the new Kansas factory promise to strengthen Panasonic's standing, if production targets are met on time. Kusumi declined to provide specifics on the start of production, only hinting at an internal target.
Last week, Panasonic announced it will axe 10,000 jobs, or 4.3 percent of its workforce, as part of a long-overdue restructuring plan to focus on more profitable ventures and possibly divesting from less profitable ones such as the TV unit that made Panasonic a household name.
Enrichment Insights:- The Kansas plant is expected to become the world's largest battery manufacturing facility upon completion and is integral to boosting Tesla's U.S. production capacity by 60% by March 2027.- A streamlined local supply chain and less exposure to international logistics complexities and tariffs are additional benefits of the accelerated battery production in the U.S., further bolstering Tesla's competitiveness.
- Tesla's urgency for a swift supply of EV batteries, driven by the need for qualifying for substantial consumer tax credits, has resulted in Panasonic's client urging an expedited process at their new battery plant in Kansas.
- The energy industry's landscape is changing, with finance playing a crucial role, as seen in the shift from Chinese to U.S.-made Panasonic batteries by Tesla to qualify for subsidies and evade tariffs.
- The increasing demand for EV batteries in the United States is significant, not just for technology companies like Panasonic, but also for the country's energy and business sectors, as demonstrated by Tesla's strategic moves.
- Amidst challenges like fires involving specific automaker vehicles and incidents of vandalism, the technology and industry sectors, particularly for electric vehicles, exhibit a strong demand for domestic batteries, as indicated by Tesla's lean towards U.S.-based batteries for its American-sold vehicles.
