Panasonic Holdings has announced that its electric vehicle (EV) battery division is likely to fall short of its profitability target due to an unforeseen decline in the North American EV market. The company’s EV battery arm, Panasonic Energy, had aimed for a 12% return on invested capital by the fiscal year ending March 2025 but now forecasts a return of just 9.1%, even with substantial U.S. government subsidies.
President and CEO Yuki Kusumi attributed the shortfall to an unexpected drop in demand for Panasonic’s older-generation 1865 batteries, which are produced in Japan and shipped to the U.S., primarily for Tesla’s Model X and Model S. Analysts suggest that these models are experiencing slower sales due to their higher prices amidst a general EV market slowdown. Consequently, Panasonic has announced a reduction in the production of these batteries in Japan.
Kusumi acknowledged that Panasonic was slow to adapt to changes in Tesla’s strategy. “We were unable to notice our customers’ true intentions, if I dare say so,” he remarked. He further noted that several automakers are now diversifying their product ranges to better meet broader customer needs, rather than focusing solely on battery EVs.
This strategic oversight has broader implications for Panasonic, which also faces challenges in other sectors such as heat pump systems. Kusumi emphasized the company’s commitment to cracking down on underperforming businesses, ensuring that each division is evaluated rigorously in terms of growth and return on investment.
Despite reporting a record net profit of 443 billion yen ($2.8 billion) for the fiscal year ending March, Panasonic is expected to miss its ambitious targets of a 10% return on equity and a cumulative operating profit of 1.5 trillion yen by March 2025.
In a bid to streamline its operations, Panasonic has already decided to sell its car parts subsidiary to a U.S. asset management firm. Kusumi also highlighted other underperforming segments, including TVs and factory automation products in China, as areas requiring urgent attention and potential restructuring.
The announcement underscores the volatility and rapid shifts in the EV market, challenging even established players like Panasonic to stay ahead of evolving customer demands and competitive pressures.
