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Handle Panasonic with care after Tesla’s electric shock: Gadfly

These days it seems that going into Tesla Inc. seems precarious, especially for its sole battery supplier, Panasonic Corp.

The Japanese company's stock is They plummeted to 9 percent after an avalanche of bad news from Tesla in recent weeks. First, the US electric car manufacturer. UU It reported another fatal collapse, then a deficit in production targets for its mass market model 3 and, on top of that, a downgrade by Moody & s Investors Service in liquidity issues. The cost to insure Panasonic's five-year debt – a broad indicator of risk – has sharply increased.

That Panasonic is dancing to the rhythm of Tesla is not a big surprise, usually it is. Investors have long seen the electronics giant as a move derived from their US client. UU His thesis: more Teslas, more batteries. To be fair, Panasonic has a solid battery technology, better than the one Samsung SDI Co. has, and has focused its efforts on the automotive industry. In fact, moments of weakness in Panasonic's stock are often seen as an opportune time to buy. This time, there are other factors to consider.

First, the confidence level of Panasonic. The Osaka-based company revised down its estimates of sales and operating profit for rechargeable batteries for the entire fiscal year in February because it had to push sales plans in North America to "future periods." His exaggerated gigafabrication association with Tesla in Nevada has exceeded expectations. Panasonic is accumulating capital spending on the $ 5 billion project, partly raising debts to do so. Moody's expects the company to pay more than 50 percent of its capital expenditures in the automotive segment, including battery plants.

In addition to Tesla, Panasonic relies heavily on the broader electric vehicle industry, where prospects darken amid the lackluster interest of the Trump administration in green policies. Earlier this month, the US Environmental Protection Agency UU He said he was reviewing the fuel efficiency standards that allow manufacturers to "make cars that people want and can afford." That reduced the enthusiasm for the potential growth of electric cars.

Then there is China, the largest electric vehicle market in the world. Panasonic, along with other manufacturers of foreign batteries, runs the risk of being blocked by new energy policies aimed at cornering the global market. China's own battery champion, Contemporary Amperex Technology Co., is pushing world competitors aside as it increases production and pushes prices, while reaching standards to supply BMW AG.

Panasonic began manufacturing batteries for hybrid cars in the northeastern city of Dalian last month, entering a market that seems increasingly saturated as increasing volumes push margins. Meanwhile, Tesla, which sells in China only through exports, may also be at risk of being involved in a commercial dispute with EE. UU

Panasonic shares fell about 7 percent this year in Tokyo and are traded with a price higher than the South Korean battery buddies have 14.4 times more profit. Tesla has recovered from a beating in the USA. UU While the eternal optimists that feed its emergence resurface. But investors should be careful to return to the batteries that drive this trip.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Anjani Trivedi is a Bloomberg Gadfly columnist covering industrial companies in Asia. Previously he worked for the Wall Street Journal.

To contact the editor responsible for this story: Matthew Brooker at mbrooker1@bloomberg.net.

© 2018 Bloomberg L.P.


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