Japanese tech manufacturer and Tesla supplier Panasonic has reduced electric vehicle battery production, sparking fears of an electric vehicle slowdown.
In its earnings report released Monday, Panasonic confirmed that it had slowed down automotive battery manufacturing over the last quarter to reach “an appropriate inventory level, in response to rapidly-reduced demand.” The company also reduced its full-year profit guidance by 15% for the battery segment despite noting that it would continue to prioritize its electric vehicle operations.
The move comes amidst widespread concerns of a weakening EV market. Although most major automakers have seen sales of battery-powered cars improve on a year-over-year basis, OEM executives have been slowly dialing back expectations on the segment for several months. In October, Ford delayed investments totaling $12 billion, which would have heavily expanded its EV manufacturing capabilities. General Motors also postponed the release of a planned electric pickup. Both companies blamed their decisions on slower-than-expected EV sales. Tesla, who has been a primary client of Panasonic for years, has also struggled with demand throughout the year despite implementing numerous price cuts to attract buyers.
Tesla shares tumbled 5% on Monday as shareholders reacted to the news that Panasonic would cut battery production. During the company’s second-quarter earnings call, CEO Elon Musk sought to temper expectations for the July-September period, predicting that high interest rates and factory maintenance were impacting its ability to sell and build electric vehicles. The entrepreneur’s warnings proved to have merit as the automaker failed to meet analyst forecasts for Q3.
To improve electric vehicle demand, Panasonic, Tesla and other companies will need to address the core issues preventing widespread adoption: driving ranges, charging accessibility and, most importantly, cost. Although effort has certainly been made, automakers have spent substantially more time and money expanding EV manufacturing than they have solving these three obstacles. As a result, production has far outpaced demand, and, although it is largely self-inflicted, it is little wonder that OEM executives are feeling disillusioned with the segment. Going forward, the automotive sector will need to work harder to lay the groundwork for electric vehicles to make up for lost time.