Panasonic: Accelerating Capacity Expansion for Auto Rechargeable Batteries

We raise Panasonic’s 6752 fair value estimate to JPY 1,650 from JPY 1,400, mainly based on the more optimistic outlook for the automotive rechargeable battery business. At the company’s strategy briefing held in early June, the company stated that it aims to increase its global production capacity for automotive rechargeable batteries to 200 gigawatt-hours by fiscal 2030 (ending March 2031). This is about four times the current capacity of over 50 GWh. Panasonic has been reluctant to build more plants as it has taken longer than expected to improve the profitability of the Nevada plant. We are therefore encouraged that Panasonic is now becoming more aggressive in capacity expansion. We believe that Panasonic’s shares are currently fairly valued.

Panasonic is expected to benefit from the Inflation Reduction Act to a greater extent than other companies, as Panasonic has been producing automotive rechargeable batteries in Nevada since 2017. The company expects the positive impact of the act’s tax credit on operating income to be approximately JPY 80 billion in fiscal 2023, which we estimate to be the remaining amount after allocating half of the tax credits to battery price reductions. We believe that Panasonic will take advantage of this to accelerate the expansion of production capacity in the U.S. The Kansas plant, which is currently under construction, is to begin operations in fiscal 2024, and once its phase one capacity is fully operational, Panasonic’s production capacity should reach approximately 80 GWh. In fiscal 2023, the company will finalize the details of the new plant, which will follow the current plant in Nevada and the new plant in Kansas.