Tesla's Production Surge Means Losses for Battery Supplier -- WSJ

By Sean McLain 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (November 1, 2018).

TOKYO -- Tesla Inc. supplier Panasonic Corp. said its battery business lost money for a second consecutive quarter as production of the electric-car maker's Model 3 sedan accelerated.

Panasonic on Wednesday posted a Yen7.3 billion ($65 million) operating loss for the July-September quarter in the business segment providing the battery cells that power Tesla's electric cars. Elon Musk, Tesla's chief executive, has been pushing to produce 5,000 of the entry-level Model 3s a week, a pace he has said is necessary to generate steady profits.

Last week, Tesla reported a record quarterly profit, crediting increased deliveries of the Model 3, which starts at $46,000. Tesla said it produced an average of 4,300 Model 3s a week, excluding planned downtime, during the quarter.

Panasonic said it had to add production more quickly than anticipated and hire more workers at the Nevada battery factory it jointly runs with Tesla, known as the Gigafactory. The increase in fixed costs pushed the business into the red, the company said.

"We are investing in a lot of people so we can catch up with the pace of production," said Hirokazu Umeda, Panasonic's chief financial officer.

Mr. Umeda said Panasonic hopes to reap the benefits of increased Tesla sales in the latter half of the Japanese company's financial year, which ends in March. It aims for a Yen22.1 billion full-year operating profit from the battery business, which lost Yen8.4 billion in the April-June quarter.

Mr. Musk's Twitter activity has drawn the ire of regulators. Panasonic's chief executive, Kazuhiro Tsuga, said he is concerned about the tweets but the business relationship remains intact.

"Elon being Elon, it's very difficult to foresee what he will do in the future, but we hope there will not be confusion in the business itself," Mr. Tsuga said. "It is important to us for Tesla's business to grow smoothly over the long term and in a stable manner."

Tesla is Panasonic's largest battery customer, but the Japanese company wants to sell more to other car makers.

"We're trying to hedge the risk as much as possible," Mr. Tsuga said.

Write to Sean McLain at [e-mail]

(END) Dow Jones Newswires

November 01, 2018 02:47 ET (06:47 GMT)

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