Panasonic's battery unit benefits from US subsidy as weak EV demand to impact sales

Chiang, Jen-Chieh, Taipei; Peng Chen, DIGITIMES Asia 0

Credit: AFP

Panasonic Group reported a record-high net income for the fiscal year ending in March 2024. Its battery business received significant tax credits from the US Inflation Reduction Act (IRA).

However, the result of the US presidential election in November creates uncertainty about the incentive's continuance. Soften demand for EVs is also expected to drive down Panasonic's battery sales. On May 9, Panasonic announced its financial result for fiscal 2024 ending in March. According to Nikkei and Kyodo, Panasonic achieved JPY443.9 billion (US$2.85 billion) in net profit, a 67.2% growth from the previous year.

The record-high performance was primarily driven by the tax credit worth JPY86.8 billion from the IRA for Panasonic's EV battery production at Gigafactory 1 in Nevada. Hirokazu Umeda, Panasonic Group's executive vice president and chief financial officer, said the US subsidy creates the strongest cost competitiveness for the company's battery products. However, according to Panasonic's forecast for fiscal 2025, its battery sales are estimated to decrease by 5% year-on-year to JPY877 billion.

Slow EV demand has hindered Tesla's global EV sales, Panasonic's primary customer. Analysts with IwaiCosmo Securities said battery deliveries will likely decline lower than expected. Due to the unpredictability of the market outlook, industry players may delay their investment in EV batteries.

Panasonic said it aims to raise the operating profit of its battery business in the new fiscal year by improving the production process and lower purchase costs. The goal is to grow the operating profit by 20% to JPY109 billion.

The Japanese enterprise is expected to receive US$87 billion from IRA in fiscal 2025, similar to what it gained in the previous year. Still, if former US president Donald Trump is re-elected in November, he may change US policies that enable substantial subsidies for the EV industry.

Panasonic said its battery subsidiary, Panasonic Energy, will start the volume production of the 46800 EV battery in September 2024. The batteries are expected to power Tesla EVs.

As Tesla faces challenges in boosting its US EV sales, Panasonic has developed new battery customers, including Japan-based Mazda and Subaru. Umeda said the company's strategy for its battery unit will be "US plus Japan" from now on.