Panasonic’s Move From Mobiles to Car Components Seems to Be Paying Off

Panasonic's Move From Mobiles to Car Components Seems to Be Paying Off

Japan’s Panasonic lifted its outlook for earnings this year after reporting a 23 percent jump in third-quarter operating profit on healthy sales of car components and factory automation equipment.

The strong result underscores Panasonic’s shift away from the price competition of smartphones and other lower-margin consumer products, reinventing itself as a provider of automotive batteries and components, as well as automation equipment.

Panasonic, the exclusive battery cell supplier for Tesla’s mass-market Model 3 sedan, raised its profit forecast for the year ending March to JPY 350 billion (roughly Rs. 20,500 crores) from JPY 335 billion (roughly Rs. 19,500 crores), in line with market estimates.

Production delays in the Model 3 have led Panasonic to downgrade the full-year forecast for its rechargeable battery business to an operating loss of JPY 5.4 billion (roughly Rs. 315 crores) from a profit of JPY 6.6 billion (roughly Rs. 385 crores) previously, highlighting the impact of any change in strategy at the US electric vehicle maker.

Tesla last month delayed a production target for the Model 3 sedan for a second time, saying it would likely build about 2,500 Model 3s per week by the end of the first quarter, half the number it had earlier promised.

A streak of solid results at Panasonic have been driven mainly by the strength of its automotive unit – a business the firm is trying to strengthen by expanding battery production capacity globally to meet an anticipated surge in electric vehicle demand.

For the quarter just ended, Panasonic’s operating profit surged to JPY 120.1 billion ($1.09 billion), beating an average estimate of JPY 105.7 billion.

It started mass production of battery cells at Tesla’s Gigafactory in Nevada earlier last year and started mass production at a new plant in Dalian, China in December. It is also adding new production lines in Japan.

Aiming to reduce its dependence on Tesla, Panasonic recently partnered with Toyota to develop and supply batteries for electric vehicles.

Panasonic also took control of Spanish auto parts maker Ficosa International SA last year, a deal that has helped lift the Japanese firm’s earnings.