Panasonic’s Battery Division Back to Profitability Thanks to Tesla Motors’ Cell-Hungry Model S

4 years ago by Mark Kane 15

Tesla skateboard with battery pack

Tesla skateboard with battery pack

According to a new Lux Research report, Panasonic’s Battery Division is back to profitability and is expanding, thanks in no small part to U.S.’ EV sales surge.

Panasonic Energy President Naoto Noguchi Gives Tesla CTO JB Straubel On Of The First 18650 Lithium-ion Cells At Panasonic's Suminoe Factory In April Of 2010

Panasonic Energy President Naoto Noguchi Gives Tesla CTO JB Straubel On Of The First 18650 Lithium-ion Cells At Panasonic’s Suminoe Factory In April Of 2010

First, the profits:

“Panasonic’s lithium-ion (Li-ion) battery division is resurgent: In Q2 2013, it made about $40 million in profits, a turnaround from one year before, when it lost $20 million in Q2 2012. As a result, Panasonic will invest $200 million over the next year to expand its Li-ion production lines in Osaka and Kasai, making batteries destined for automotive applications.”

The sales surge seems to come from Tesla Motors’ ordering of cells for Model S. Lux Research estimates that 16,000 packs are on average worth around $400 millions in revenue for Panasonic or around $25,000 per Model S.

“The company’s improved Li-ion fortunes coincide with its customer Tesla Motors beginning to ship the Model S, an electric vehicle (EV) that packs a massive 60 kWh to 85 kWh worth of batteries. About 16,000 Model S units have been sold thus far, accounting for more than $400 million in revenues for Panasonic.”

Such a high amount makes Panasonic the leading battery supplier for plug-ins and hybrids sold in the U.S. with 50% market share:

Moreover, Panasonic has become the leading battery supplier for plug-ins and hybrids sold in the U.S. Its market share by capacity sold has increased to 54% during the last year, overtaking LG Chem and Nissan’s AESC in the process

Panasonic has become the leading battery supplier for plug-ins and hybrids sold in the U.S. Its market share by capacity sold has increased to 54% during the last year, overtaking LG Chem and Nissan’s AESC in the process

Panasonic 18650 Cells

Panasonic 18650 Cells

Success come after four years in the making and involved Panasonic investing $30 million in Tesla in 2010.

Tesla is now a larger customer for Panasonic than Toyota or Volkswagen:

“Remarkably, the upstart Tesla now drives more of Panasonic’s battery revenues in the U.S. than the world’s largest automakers, like Toyota and Volkswagen. A mere 20,000 Tesla Model S units use three times more battery capacity than the U.S. sales of Toyota’s popular Prius hybrid family (which moved about 230,000 units during the past year). Tesla’s battery demand now outweighs all other OEMs in the U.S., taking 49% of the market share for battery capacity shipped in the U.S. plug-in and hybrid market in Q2 2013.”

As we know from previous posts, Tesla looking also for another suppliers to provide cells for subsequent models:

“Others are taking notice of Tesla’s increased clout: Samsung SDI, BYD, and LG Chem have reportedly been in talks with the automaker, seeking to supplement or displace Panasonic. However, they may have to wait for Tesla’s next model, because Tesla could find it difficult to mix cells from different suppliers, due to battery management system considerations, and because the Panasonic-Tesla contract stipulates supplying 80,000 vehicles by 2015. Interested parties should now expect increased development and more pricing pressure for the Panasonic-Tesla battery solution, including more research on 18650 automotive cells and a strengthening nickel cobalt aluminum (NCA) cathode value chain.”

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15 responses to "Panasonic’s Battery Division Back to Profitability Thanks to Tesla Motors’ Cell-Hungry Model S"

  1. ItsNotAboutTheMoney says:

    All of this, of course, is figured into the Tesla business model. What are the three important challenges for PEVs?
    – Battery pricing
    – Charging rate
    – Energy density.

    While other manufacturers have tried to sidestep the battery limitations pricing issue, Tesla’s model attacks the issues head on:
    – Use the cheapest solution (large battery helps by volume multiplier)
    – Try to increase the charging rate in mph (large battery helps by volume multiplier; focus on excellent battery management)
    – Use a dense solution (focus on excellent battery management)

    At $300/kWh, the 60kWh battery’s $10k more than the Volt’s battery.
    At $200/kWh, the 60kWh battery’s $6.7k more than the Volt’s battery.
    At $100/kWh, the 60kWh battery’s $3.3k more than the Volt’s battery.
    And of course, that assumes GM can match Tesla’s battery price.

    Plus, of course, the large battery can deliver excellent performance. And I’m sure Panasonic will be working with Tesla to lower the prices further, because the volume potential is so great.

    1. GeorgeS says:

      looks like 295$/kwh for 18650’s that Tesla buys. That puts the Volts 16 kwh battery at 4700$ (if it was 18650’s).

    2. pjwood says:

      18650 volume doesn’t come from Tesla’s battery being big. It comes from many apps.

      15,000 MWH of them go to other uses, where above its 700 to PHEV. Chart from Seeking Alpha: http://seekingalpha.com/article/1677452-putting-tesla-motors-gargantuan-battery-supply-problem-into-perspective

      Incidentally, that was a google hit. Like other here, who have a grasp of numbers, it is always funny to read politically skewed crap, like this story, where facts may be correct but something so obvious as Musk’s achieving supplier competition goes un-noticed. If I’m “seeking alpha”, I look to pit Samsung against Panasonic, not fund proprietary complexity, if I can avoid it.

      1. GeorgeS says:

        Interesting that the article says that costs to manufacture have come down to the point that 75% of the battery cost is materials and therefore further cost reductions are only marginal.

        Do you buy that argument? I don’t think I do.

  2. David Murray says:

    I’d really like to hear the reasons why Tesla uses the 18650 and everyone else uses their own proprietary cells? I like the idea of generic cells so that in the future the battery packs can be refurbished by anyone.

    1. GeorgeS says:

      Yup, that’s still the biggest question in my mind. We have been discussing it since what 2009? It has to be price. 20K divided by 85 is 295$/kwh. We’ve all seen the video of Tesla robots putting together a Model S. I’d like to see them put together a battery pack.

    2. Anderlan says:

      Compare the machinery in cylindrical 18650s: https://www.youtube.com/watch?v=ksxSOwA933M

      To the (lack of) machinery in pouches: https://www.youtube.com/watch?v=HJrNCjVS0gk

      This is not to say that over the long term pouch cells aren’t probably the winner, considering that the major OEMs have the capital and manufacturing muscle to make the latter video look more like the former. But Tesla was looking at the market around the time that pouch video was made. Given the timing, their hell-bent-for-leather determination to make cheap EVs happen, and their lack of 10 billion dollars and 5 years to improve and ramp pouch production, the only answer for them was 18650s.

      1. Anderlan says:

        Which is not to say that they may not change in the future as they continually re-evaluate the market.

  3. GeorgeS says:

    Here’s a little secret that most people don’t understand.

    What is the cycle life of a Panasonice 18650??

    answer is 500 cycles…….pretty bad right?

    How can Tesla be using a battery that has such a terrible cycle life??

    Simple, just make the pack large enough that the cycles are reduced.

    1. David Murray says:

      I had wondered about that. And so I guess with the smaller battery packs in plug-in hybrids you need a pack with a higher cycle life.

      1. GeorgeS says:

        and higher cycle life means higher $.
        This is how Tesla keeps battery prices down.
        By making huge batteries.
        Ironic isn’t it.

        1. Mint says:

          Yeah, but increasing cycle life doesn’t increase cost proportionally. You’ll get a lot more miles out of a battery pack over it’s lifetime by using a higher cost, higher cycle battery. This is why I hope we start moving to a battery lease model, because manufacturers will have a financial incentive to make the most cost effective battery in the long term. A battery that lasts 2000 cycles can do 7000 lifetime miles per kWh (and still be useful thereafter with reduced range). Leasing it for $0.25 per cycle per kWh should pay for itself with lots of profit, given today’s low interest rates, and be cheaper than gasoline.

          I don’t think you’re right about Tesla’s batteries only having 500 cycles of life. Panasonic’s EV 18650’s aren’t identical to their laptop 18650’s. They put out a paper on it:
          http://ma.ecsdl.org/content/MA2011-02/17/1282.full.pdf

          It looks like they cycled through ~50% depth of discharge (they only mention 4.05V to 3.6V), but it’s still over 85% capacity after 3000 cycles and elevated temperature.

    2. Koz says:

      Doesn’t change your point, which is a good one, but I think the cell used is rated 1000 cycles. With low C draw and significantly less than 100% cycling most of the time, actual cycle life should be better. Another relevent question for this cell is what is the calendar life?

  4. Ocean Railroader says:

    From this article I bet Panasonic is about as happy as a cookie factory winning the contract to supply the cookie needs of a army of 40,000 Cookie Monsters.

    In the case of Panasonic from what Eon Musk says not even their 200 million dollar expansion program will be enough to meet their hunger for batteries. I hope they build a factory in the US in that it seems wasteful to have to bring all the resources to make batteries to Japan and then have to ship them half a world away to the US. Instead it might be cheaper to make them in California or a state next to California and then bring them in for Tesla. But Tesla’s cravings for batteries is most likely so strong they would most likely munch their way though all of the existing and expanded battery making abilities in Japan and still eat up three to five US factories worth of batteries for their EV’s.

  5. Bill Howland says:

    500 cycles?

    Well, that sounds about right.. I charge my Roadster less than once per week, so at that rate the battery will last 10 years, providing it doesn’t die of old age at 6.