January 23, 2019 / 6:30 AM / a month ago

Breakingviews - Toyota JV recharges Panasonic’s battery business

Workers set up a Panasonic booth at the Las Vegas Convention Center in preparation for 2019 CES in Las Vegas, Nevada, U.S. January 6, 2019. REUTERS/Steve Marcus

HONG KONG (Reuters Breakingviews) - A joint venture with Toyota should help recharge Panasonic’s battery business. The deal unveiled on Tuesday involves pooling resources at factories in Japan and China by the end of 2020. It represents a technological step forward for the $200 billion automaker, whilst reducing Panasonic’s dependence on Tesla.

Panasonic enjoys a cosy relationship with Elon Musk’s electric-car maker. Although they don’t have a formal partnership, the Japanese company controls production lines at the heart of Tesla’s manufacturing facility in Nevada. The arrangement allows a specific Panasonic cylindrical cell to pass directly to the factory floor. This setup makes it practically impossible, however, to supply those products to other customers.

Going it alone on new EV developments could be risky and expensive, too. Global automakers already have earmarked some $300 billion to develop green cars over the next decade, Reuters reported earlier this month. In contrast to competitors such as CATL and LG Chem, Panasonic has hesitated to take the plunge.

Much like Apple suppliers, whose own fortunes can be tightly linked to the smartphone maker’s, the Japanese manufacturer’s success has started to reflect Tesla’s own wild swings. For example, Panasonic shares swooned on Tuesday after Reuters, citing unnamed sources, reported that the carmaker had signed a preliminary agreement to buy batteries from a Chinese company for its new Shanghai factory. Musk denied it on Twitter.

For Panasonic, a healthier mix of customers and products would help relieve some of this pressure. Toyota, which has developed hybrids and other alternatives, aims to have more than 10 battery-powered models by the early 2020s and annual sales of more than 5.5 million electric vehicles by 2030. What’s more, the two partners will focus on newer battery technology – prismatic and solid-state – which could appeal to a wider range of carmakers.

Success could have its drawbacks, though. Toyota will keep 51 percent of the new venture. It plans to supply other automakers, but the majority owner will have the final say. In the fast-growing and cutthroat battery market, it is easy to imagine a scenario where Toyota’s ideas about sharing a supplier could change. For now, though, the new Panasonic partnership is more positive than negative.

Breakingviews

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