Panasonic: will expand battery capacity to consolidate with Tesla's North American "stronghold"

SMM News: although Musk's several "price cuts" made Panasonic battery very unhappy, and even the two privately threatened to go their separate ways, Panasonic battery is willing to let go of face and continue to be closely bound with Tesla in the face of rising battery profits.

According to foreign media reports, Panasonic Battery revealed that it plans to increase the production capacity of the Gigafactory1 battery factory in Nevada (No. 1 super factory) from the current 35GWh by 10% to 39GWh in 2021. To this end, Panasonic is expected to invest more than $100 million to expand capacity.

It is understood that Nevada's "No. 1 super factory" currently has 13 production lines, and Panasonic is considering adding a new production line to increase this 10% production capacity.

In parallel with the increase in capacity, Panasonic is upgrading the production line of its No. 1 super factory. "Panasonic batteries are also upgrading the batteries produced by the above-mentioned factories, and the storage capacity of the batteries produced will be increased by 5% from September this year."

01 "exclusive" status is no longer affected by the installed capacity

In 2014, Panasonic announced a partnership with Tesla to build the first power battery plant, Gigafactory 1, in Nevada, USA, with a planned capacity of 35GWh (currently around 32GWh), of which Panasonic Battery invested $1.6 billion. So far, the plant is still the world's largest single lithium-ion battery factory.

But the plant is still unable to meet Tesla's growing demand, and its production capacity has seriously restricted Model 3 production as demand for hot-selling models such as Tesla's Model 3 increases. To this end, Tesla CEO Musk has repeatedly expressed the hope that Panasonic battery can achieve full production as soon as possible, and asked Panasonic battery to continue to reduce battery prices to support Tesla's growing business.

The call for capacity expansion and the "price reduction" of the battery also upset Panasonic. In fact, with battery capacity constraining Tesla's production, Tesla's production has been below expectations, and its share price plunged more than 20 per cent in the first half of 2018. As a result, Panasonic's share price once plummeted by more than 9 per cent. At that time, Panasonic of Japan thought that the risk of his cooperation with Tesla's car battery was increasing, and Panasonic was now considering not investing in the Tesla battery superfactory (Gigafactory1) in Nevada.

On the other hand, Musk has also complained that Panasonic battery capacity restricts Tesla's capacity. Musk once wrote directly: "the Panasonic battery production line in the No. 1 super factory has an annual output of only 24GWH, and has restricted the production of Model 3 since July 2018. Tesla will not invest in super factory capacity until the existing battery production is close to 35GWh. "

The two sides have their own opinions, but Tesla's voice is obviously stronger, and when the production capacity of the No. 1 super factory restricts the production capacity of Tesla's best-selling model, Model 3, Musk began to look for other battery suppliers.

In August 2019, the news that South Korea's LG Chemistry had become the second supplier of Tesla batteries spread like wildfire, and then the declaration information of Tesla (Shanghai) factory Model 3 in China's Ministry of Industry and Information Technology confirmed that LG Chemistry had become the battery supplier of Tesla (Shanghai) factory.

We all know the rest of the situation. after LG Chemistry got close to Tesla, the installed capacity was like riding a rocket and flew in a straight line. Data show that the installed capacity of power batteries in LG Chemical in the first half of 2020 was 10.5GWH, compared with 5.7GWH in the same period last year, an increase of 84.21% over the same period last year. This has also increased LG Chemical's share of the global electric vehicle battery market to 24.6% in the first half of this year, ranking first in the world. After becoming a battery supplier at the Tesla (Shanghai) factory, LG Chemical first surpassed BYD, then overtook Panasonic batteries, and then snatched the top spot in global power battery installation from Ningde era.

In contrast to Panasonic batteries, the No. 1 super factory was shut down in the second quarter due to the epidemic in the United States, resulting in a 31.5% drop in battery installation in the first half of the year.

In February this year, Ningde Times also said publicly that the company had also entered the Tesla supply chain and officially became a supplier of Tesla batteries, and Jiang Li, deputy general manager of Ningde Times, revealed, "the cooperation between the company and Tesla is not limited to the Chinese market."

On the one hand, Panasonic batteries are no longer the "exclusive" supplier of Tesla; on the other hand, Tesla's sales have reached new highs one after another, making new records for competitors' battery installation. Panasonic, which once threatened not to consider deepening cooperation with Tesla, should be very unpleasant.

02 Panasonic deepens its relationship with Tesla to stabilize its "stronghold" in North America

It is OK to engage in emotional things occasionally, but in the face of the interests of real money, we still have to look down at "money". For Panasonic batteries, it is also easy to maintain a good relationship with Tesla. At Panasonic's second-quarter earnings report in 2018, Panasonic Chief Financial Officer Yuichi Meida (Hirokazu Umeda) said that the joint venture between Tesla and Panasonic (Gigafactory 1, Nevada) would not consider investing in new capacity until it was profitable. As long as the No. 1 super factory built in cooperation with Tesla in the United States is profitable, the two sides can put aside their past grievances and continue to deepen cooperation.

In fact, for Panasonic batteries, outside the North American market, it seems that Tesla has been marginalized.

At the Chengdu Auto Show held a few days ago, the relevant person in charge of Tesla said bluntly, "in our current supply system of Chinese-made models, we have completely terminated the contract with Panasonic batteries, that is to say, Chinese-made Tesla will no longer use Panasonic batteries." At this stage, the Tesla model 3 produced by the Shanghai factory still uses LG chemical batteries, but the models equipped with Ningde era batteries in the near future will come off the line one after another. "

Obviously, in the Chinese market, Panasonic battery is no longer Tesla's "close partner", while the Chinese market, as well as the rapidly rising European market, the cake is so big that it is impossible to say Panasonic battery is not coveted. Panasonic battery must also be thinking of getting back together with Panasonic. But even as the "stronghold" of Panasonic's cooperation with Tesla, the North American market is being watched covetously by other international battery giants.

In May, Panasonic said in its 2019 fiscal year (April 1, 2019 to March 31, 2020) that Nevada Gigafactory 1 had made a profit for the second consecutive quarter. "Panasonic is currently considering continuing to expand the plant's capacity," Panasonic chief financial officer Yuichi Meida (Hirokazu Umeda) said in the financial report.

This increase in production capacity is about 10%, which is believed to be what was said at the earnings meeting in May this year.

Tesla signed a 2020 pricing agreement with Panasonic on June 10, involving the production and supply of power batteries at Panasonic's super factory in Nevada, according to a filing with the Securities and Exchange Commission (SEC) (SEC) in June. "the new agreement also sets out specific terms on pricing, planned investment and new technology on both sides, as well as Panasonic's production capacity and Tesla's purchase quantity in the two years prior to the agreement." Industry insiders believe that Panasonic may continue to deepen its relationship with Tesla through this agreement.

In addition to continuing to consolidate the relationship with Tesla in terms of production capacity, Panasonic batteries also actively cater to Tesla's taste through technological upgrading, hoping to further deepen the binding relationship between the two sides.

For example, last month, Panasonic's head of electric vehicle battery business in the United States said Panasonic plans to increase the energy density of the 21700 battery supplied to Tesla by another 20% within five years, and plans to commercialize cobalt-free batteries within 2-3 years. The cobalt-free battery has always been what Musk wanted. "at present, Panasonic has reduced the cobalt content in Tesla's battery to less than 5%."

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