© Reuters.
Japan’s Panasonic (OTC:) Holdings has revised the operating profit forecast for its energy unit downwards by 15% due to a decrease in demand for high-end electric vehicles (EVs) in North America. Panasonic’s Group CFO, Hirokazu Umeda, announced the revised full-year operating profit forecast of 115 billion yen (US$769 million), a significant drop from the previous estimate of 135 billion yen. The announcement was made during a second-quarter earnings briefing held at 0900 GMT today.
The reduced forecast is in sync with concerns expressed by several automakers and suppliers about slower growth in key economies like China and Europe. Panasonic’s energy unit, which manufactures battery cells for Tesla (NASDAQ:)’s luxury Model S and Model X vehicles, has experienced a dip in demand as these cars exceed the U.S. tax credits price eligibility. This situation led to a 60% cut in Japan’s automotive battery production in Q2 to balance inventories.
The decrease in demand for high-end EVs in North America is attributed to the U.S. Inflation Reduction Act influencing consumer behavior. Despite these challenges, Panasonic has maintained stable North American operations and steady sales of vehicles eligible for government tax credits.
This trend is not unique to Panasonic. Other industry players are also experiencing similar situations. LG Energy Solution predicts slower revenue growth in 2024 due to global economic uncertainties affecting the EV sales outlook. Tesla CEO Elon Musk has also expressed caution about expanding EV production capacity due to fears that higher borrowing costs could render vehicles less affordable despite recent price cuts by Tesla. Additionally, General Motors (NYSE:) is postponing the launch of several EV models to trim costs and cut back on EV product spending.
These developments have been documented by reporters Daniel Leussink, Kim Coghill, and Miral Fahmy.
InvestingPro Insights
Based on real-time data from InvestingPro, Panasonic’s market cap stands at 22303.1M USD. The company’s P/E Ratio is 7.97, indicating that it is trading at a low earnings multiple, a factor that could make it attractive to value investors. The P/E Ratio is expected to rise slightly to 8.26 in the last twelve months as of Q1 2024. The company’s revenue growth for the same period is projected to be 11.42%.
InvestingPro Tips suggest that despite the decrease in demand for high-end EVs, Panasonic remains a prominent player in the Household Durables industry and has been profitable over the last twelve months. The company also operates with a moderate level of debt, which could be a promising sign for potential investors. Furthermore, Panasonic has maintained dividend payments for 32 consecutive years, suggesting a strong earnings potential that should allow management to continue dividend payments.
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