Panasonic’s Tesla Motors Inc Investment To Be Made One Step At A Time

Tesla stockBlomst / Pixabay

Japanese giant Panasonic Corporation (ADR) (OTCMKTS:PCRFY) (TYO:6752) said Wednesday its investment in Tesla Motors Inc (NASDAQ:TSLA)’s $5 billion plant will be in line with market demand.

Panasonic’s Executive Officer Shinji Sakamoto said: “We have no intention of taking on a big adventure all at once”.

Panasonic’s deal with Tesla

In October, Tesla Motors Inc (NASDAQ:TSLA) entered into an agreement with Panasonic Corporation (ADR) (OTCMKTS:PCRFY) (TYO:6752) for the supply of battery cells for its electric vehicles, which may eventually earn the electronic giant $7 billion in revenues. According to the agreement, Panasonic will supply 2 billion lithium-ion batteries used in electric cars to the Palo Alto-based company in the four years through 2017.

The electric vehicle maker has plans to build a gigafactory for lithium-ion batteries, which is expected to be operational by 2017.The Li-ion battery is one of the most expensive parts of an electric vehicle. Building to scale will reduce costs and bring down the price tag for Li-ion batteries. As a result, Tesla Motors Inc (NASDAQ:TSLA) will be able to reduce the price of its vehicles.

In February, Tesla Motors Inc (NASDAQ:TSLA) indicated that the factory would cost around $5 billion, while also producing a number of jobs.

Earlier, Tesla Motors Inc (NASDAQ:TSLA) Chief Executive Elon Musk said Panasonic Corporation (ADR) (OTCMKTS:PCRFY) (TYO:6752) would be the only battery company producing cells in the new factory.

Won’t be a risky gamble

Japanese giant Panasonic Corporation (ADR) (OTCMKTS:PCRFY) (TYO:6752) executives sought to ally investor concerns about the firm taking part in the electric vehicle maker’s $5 billion plant, clarifying that any investment decision will be made one step at a time, in line with market demand. In today’s investor relations event, analysts questioned how Panasonic will ensure a return on its investment and whether it has any backup plan if demand for Tesla cars doesn’t live to initial expectations.

Panasonic Corporation (ADR) (OTCMKTS:PCRFY) (TYO:6752)’s senior managing executive officer Yoshio Ito said that the division of responsibilities and share of ownership in the factory would be key factors in its decision. He further added that Panasonic had already sent a letter of intent to Tesla.

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About the Author

Mani
Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports

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