Panasonic to reduce reliance on Tesla as battery lock-up evolves

Panasonic plans to reduce its heavy reliance on Tesla by making batteries more compatible with the electric vehicles of other global automakers, according to the outgoing chief executive of the Japanese conglomerate.

Kazuhiro Tsuga’s comments come like Tesla begins to develop its own batteries and is expanding its purchasing partners to LG Chem in South Korea and CATL in China to support growing sales of its electric vehicles.

“At some point, we have to abandon our one-sided approach of relying only on Tesla,” said Tsuga, who will step down after nine years as CEO to become president effective April 1, in an interview with Financial Times. “We are entering a different phase and we need to keep an eye on sourcing from manufacturers other than Tesla.”

Panasonic made its first investment in Tesla in 2010, but it was under Tsuga that Panasonic decided to change your goal to the auto industry after unplugging its plasma display panels and other loss-making consumer lines to invest in Tesla’s $ 5 billion gigafactory in Nevada.

After spending more than $ 2 billion on their battery-manufacturing joint venture since the two companies signed an agreement in 2014, these efforts are finally paying off, as Panasonic expects to make its first annual profit from the business of Tesla batteries at the end of the fiscal year in March.

In some ways, the fact that Panasonic is no longer the sole supplier to Tesla is testament to the extent to which Elon Musk has expanded his business from a cash-strapped, loss-making company to the most valuable automobile manufacturer in the world worth $ 665 billion, more than 22 times Panasonic’s market value.

Panasonic is now working on new battery cells based on a larger format like Musk did ambitions revealed to halve the cost of Tesla’s batteries in just a few years.

But Tsuga said the company will also need to make batteries that aren’t just for Tesla vehicles.

Panasonic already has a battery link with Toyota and has already supplied batteries to European car manufacturers, including Volkswagen. But the cylindrical lithium-ion type it makes for Tesla requires sophisticated temperature management skills to keep batteries from catching fire and to make them last longer.

“We need to make batteries that are easy to use for other automakers,” Tsuga said. “Currently, it’s difficult to sell unless a company is able to handle our cylindrical batteries with Tesla specifications.”

For Tsuga, the tie-up with Elon Musk was also part of his efforts to change the Japanese conglomerate’s inward-looking corporate culture, as well as top-level executive recruitments from Microsoft and Google.

After racking up losses of nearly $ 15 billion in the two years to March 2013, Tsuga spent most of his nine years as CEO making up those losses and moving the business to stronger companies. margin.

The company’s balance sheet has since recovered and the group is now in talks for a multibillion-dollar deal to buy U.S. supply chain software provider Blue Yonder, according to two people familiar with the discussions.

“But when I tried to move into high growth areas like automotive, I realized that the various other companies weren’t able to build a growth strategy and losses kept showing up everywhere. ”Tsuga said.

To break this downward spiral, he announced his intention to move the group to a holding company structure under the leadership of the new CEO and current head of the automotive business Yuki Kusumi.

This decision, he says, will allow for swift decision-making while establishing more discipline to ensure that each division’s financial goals are met. He suggested that those that fail will likely go on sale.

“Because Panasonic is such a big company, people thought they could survive by moving to another division even though there was no future where they were currently based. We have to make sure that there is no such escape route, ”he said.

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