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Tesla's Battery Supplier Stocks Surge On Panasonic's First Gigafactory Profit

Panasonic stock jumped more than 9% in early Tuesday trade after the Japanese conglomerate the previous day reported its first quarterly profit at the battery venture.

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Shares of Asian companies in Tesla Inc's battery supply chain surged on Tuesday after Panasonic Corp's report on the first profit at its battery venture with Tesla boosted investor confidence in the U.S. electric vehicle (EV) maker.

Panasonic's first quarterly profit from its $1.6 billion investment in Tesla's so-called Gigafactory in Nevada gives another vindication for Tesla founder Elon Musk's bet on EVs against established automaking heavyweights including General Motors Co.

"When you look back, say two to three years ago, there were doubts about whether the EV era would arrive," said analyst Kang Dong-jin at Hyundai Investment & Securities in Seoul.

"But now there is more viability about the sector thanks to Tesla's strong sales and Europe's tougher emissions regulations," he said.

Panasonic stock jumped more than 9% in early Tuesday trade after the Japanese conglomerate the previous day reported its first quarterly profit at the battery venture.

The result helped drive Tesla's share price 20% higher overnight in its largest one-day gain since 2013.

Panasonic's first profit at the venture comes as the Japanese firm cedes its battery cell exclusivity, with Tesla entering into partnerships with South Korea's LG Chem Ltd and China's CATL.

CATL said in a stock exchange filing on Monday it has signed an agreement with Tesla to supply batteries from July 2020 through June 2022.

Shares of LG Chem rose as much as 9% to their highest intraday level in about 10 months, driven by hopes of a turnaround in its money-losing EV battery business.

The South Korean firm on Monday said it expected a mid-single-digit profit margin in its EV battery business this year, citing regulatory push in Europe.

POSCO Chemical Co Ltd, which recently signed a $1.6 billion deal to supply battery-making materials to LG Chem, rose 4.6% in morning trade.

CATL shares briefly rose 10%.

Analysts said Tesla's diversified battery sourcing would give the U.S. automaker the upper hand on battery costs.

"This is likely to put pressure on Panasonic to improve yield and efficiency," wrote Jefferies analyst Atul Goyal in a note to clients.

Panasonic Chief Financial Officer Hirokazu Umeda, in an earnings briefing on Monday, said the company expects to stabilise profit at the Gigafactory by next year, and that there is a lot of room to improve production efficiency.

Panasonic first entered into a battery supply agreement in 2009 and invested $30 million in Tesla to deepen the partnership a year later.

(Reuters)


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