Tesla (TSLA) shares suffered an approximately 5% decline on Monday following Panasonic’s disclosure of the electric vehicle battery production slowdown in Q3 2023, Reuters reports.
Panasonic cites weak demand for Tesla Model S and X
Tesla’s key battery supplier, Panasonic, announced it had reduced automotive battery production in the September quarter due to waning demand for high-end electric cars in North America.
The production decline reflected Tesla Chief Elon Musk’s remarks in early October that “higher-for-longer” borrowing costs would adversely affect demand for EVs.
“Panasonic’s warning of soft demand for Tesla’s Model S and Model X cars has many concerned that global economic outlook could be in worse-shape than initially believed.”
Edward Moya, Oanda Senior Marker Analyst
Purpose
Panasonic asserted that the reason behind the reduced production of its electric vehicle batteries is to reach an “appropriate inventory level, in response to rapidly-reduced demand.”
Nonetheless, the production decline only occurred in Japan for Panasonic’s global customers. In the United States, the Japanese battery producer claims have maintained a stable demand:
“Panasonic added its production at its North American operations remained steady, and it saw firm sales of vehicles eligible for tax credits.”
Reuters
However, Panasonic did not disclose which of its customers contributed to the weak demand and which did not, as observed by Electrek. Nonetheless, it asserted that EV batteries remain their investment priority.
GlobalData forecast
Analyst firm GlobalData’s company filings database revealed that critical minerals and green energy shifts have continued to grow since 2018, Future Car reported.
In addition, GlobalData also indicated that battery electric vehicles (BEVs) are the most significant “levers” for the government’s efforts to reduce CO2 emissions.
It also forecasts electric vehicle production to contribute 22% of the overall light vehicle industry to 24 million units by 2028.
The weakening demand and sakes for electric vehicles will continue to put more pressure on Tesla’s gross margin. According to the report, it declined from 25.1% in 2022 to 17.9% in July-September due to the significant price cuts Tesla launched this year.
Notably, it seems that Panasonic’s battery production slowdown is just temporary, as macroeconomic challenges impeded EV demand and new purchases.
