Panasonic wasted no time lowering its guidance after its bread-and-butter customer, Tesla, announced it was buying another battery supplier to power its electric vehicles.
The lucky company Tesla chose to replace Japan-based Panasonic is California-based Maxwell Technologies.
On the news, Panasonic lowered its profit expectations by 9%. The possible loss of Tesla isn’t the only culprit that led to the lowered guidance. The struggling tech player revealed it was also being hurt by weak demand in China for auto components and factory equipment. China’s slowing economy and the overhang of trade wars have weighed on countries and tech companies all over the world.
Back in November, it appeared that the partnership between Tesla and Panasonic was going well. CEO Elon Musk took to Twitter to sing the praises about Panasonic helping it boost profits.
Here’s the tweet.
However, Musk had other plans. CCN raised the caution flag on Panasonic last month. We pointed to Tesla’s November indication that it would diversify its sources after experiencing several problems with its Model 3 supply chain.
On the heels of that announcement, rumors swirled that Tesla was on the lookout for a new battery supplier.
In previous reports, CCN noted that Panasonic was also feeling the effects of the possibility of losing Tesla. Its stock price was down by more than 2% on the news that the carmaker was looking for a new supplier.
Interestingly, when this supply agreement was announced, Tesla stated:
“The agreement supplies Tesla with Panasonic’s lithium-ion battery cells to build more than 80,000 vehicles over the next four years. It guarantees the availability of enough cells in 2012 to meet Tesla’s aggressive production ramp-up and fulfillment of more than 6,000 existing Model S reservations. This supply agreement helps ensure Tesla will meet its cost and margin targets for Model S.”
The purchase of Maxwell Technologies comes less than a decade since Musk and company inked the deal with Panasonic. The electric vehicle maker had lauded Panasonic as being a battery cell manufacturer and a diverse supplier to the global automotive industry.
The move is a disappointing one for Panasonic, but it’s a solid one for Tesla, which has been under financial pressure.
In January, CCN reported that Tesla enjoyed a solid Q4 2018 with record production and delivery numbers driving the company’s first profit in two years. The company posted a net profit of $311.5 million and $891 million in free cash flow. However, the company’s stock price slumped 9% after it failed to meet investor targets for delivery and production numbers.
Owning battery supplier Maxwell should help the company lower its operating costs. The heavily indebted electric car company, whose CFO stepped down just four days ago, is making the acquisition in an all-stock deal.
A Tesla stock shorter (Musk has extreme disdain for them) responded to the Maxwell announcement with this tweet.
Maxwell already supplies batteries to General Motors and Volkswagen subsidiary Lamborghini. Specifically, it provides so-called ultracapacitors that store electricity and complement battery cells.
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