First of all, the Tesla Gigafactory in Nevada was profitable for the second consecutive quarter (in Q1 2020) and the profitability improved "significantly."
Since demand from Tesla was strong (before COVID-19) and should still be after the restart, the two are now in talks whether or not to expand the production beyond the current capacity of 35 GWh annually. According to Reuters, the duo is working also on new batteries:
"“We are seeing strong demand from Tesla” beyond the Nevada plant’s current capacity of 35 gigawatt hours per year, Panasonic Chief Financial Officer Hirokazu Umeda told an earnings briefing on Monday. “We are in discussions right now” about expanding the plant’s capacity, he said."
"Umeda hinted that Panasonic has been developing new batteries with Tesla. “We will be working to improve materials and technologies throughout this financial year,” he said."
Panasonic supplies Tesla with:
- 21700 cylindrical cell type for the Model 3/Model Y (produced at the Gigafactory 3 in Nevada)
- 18650 cylindrical cell type for the Model S/Model X (imported from Japan to the U.S.)
Panasonic Q1 2020 results
Let's take a look at the general results. Panasonic was hit hard by COVID-19 and reports a decline in all metrics: sales, operating profits and net profits.
"Overall sales decreased due to COVID-19 impact, in addition to business portfolio reform and weak investment demand in China."
- Sales (down 6%): 7,491 billion yen ($69.8 billion)
- Operating profit (down 29%): 293.8 billion yen ($2.7 billion)
- Net profit (down 21%): 225.7 billion yen ($2.1 billion)
Our focus is on the Automotive category, which includes lithium-ion batteries for xEVs. Unfortunately, it's not profitable.
- Sales (down 3%): 1,482 billion yen ($13.8 billion)
- Operating profit (down 34.5%): -46.6 billion yen ($-430 million)
The Automotive Batteries subcategory shows some positive signs with the profitable Tesla Gigafactory in Nevada.
"For Automotive, sales decreased due to investment effect of production expansion for Automotive Batteries being unable to offset decreased sales resulting from market slowdown, COVID-19 impact, and product cycle trend of Automotive Solutions.Operating profit decreased: The North America factory for automotive cylindrical batteries was profitable in the fourth quarter following the third quarter, thus significantly improved profitability. However, increased fixed costs for automotive prismatic batteries, increased development expenses to onboard charging systems for orders received in Europe, goodwill impairment and others led to decreased profit."
By the way, Panasonic started a new joint venture with Toyota to produce prismatic batteries for xEVs.
On the other hand, the company is closing its solar business, including the production of solar panels at the Tesla Gigafactory 2 in New York.
In terms of loss-making businesses, the Company has firmly set the direction to take for semiconductors, liquid crystal display panels, and solar.
Here is one more interesting thing - the Automotive Batteries business seems to account for close to a third of the entire Automotive segment, but we don't know whether it's profitable: