Elon Musk’s response to wavering demand and recession risk is pretty clear: slash prices, keep increasing capacity and try to continue growing even if it means sacrificing profit margin in the short term.
Hence, Tesla’s announcement this week of $3.6 billion more investment in Nevada, where it’s partnered for years with Panasonic at one of the world’s highest-volume battery plants. The carmaker said the splurge will go to 4 million square feet of manufacturing space that eventually will make 100 gigawatt-hours of cells (enough for roughly 1.5 million Model 3 or Y vehicles), as well as Semi trucks.
Musk has repeatedly referred to battery supply as the limiting factor for Tesla’s growth, and he’s far from the only auto CEO concerned about shortages. What makes him unique is his willingness to take on more risk than other executives can stomach.
Given all the uncertainty about just how quickly car companies and consumers will go electric in this more challenging macro environment, I jumped at the opportunity to speak with Allan Swan, the president of Panasonic Energy North America, on the show floor at CES earlier this month.
Panasonic has been producing Tesla’s 2170 cylindrical battery cells in Nevada since 2016. The facility now produces 37 gigawatt-hours of batteries a year (for context: one gigawatt can power about 9,000 Nissan Leafs).
Panasonic broke ground on a new $4 billion factory in DeSoto, Kansas, in November that’s supposed to start production in 2025, making 2170 cells for multiple customers, including Lucid.
Here’s an excerpt from our conversation, edited for length and clarity.
I’ve been hearing for a while that there’s not going to be enough batteries. But we’re also staring down a recession. When do you see the battery shortage easing for automakers?
The demand signal has got to be there. General Motors is clear; they want everything electric by 2030. Some of the other automakers don’t really have a full plate yet on timing. So it’s hard to see what that demand stream looks like. If we stay where we are, clearly, we don’t have enough batteries.
It will depend on how the models roll out, and how strong. For example, is the internal combustion engine product going to continue for another 10 to 20 years? If it does, the demand signal for batteries will be less.
It sounds pretty fluid.
It is very fluid. You’ll see timing for bringing in new models — some of those models are quite small in volume, they’re not huge. So that doesn’t take up huge battery demand. We work together with a lot of people on partnerships, because that allows us to tune in, both in technology, but more importantly on demand and supply. And we’re gaining capacity right now.
Kansas adds another 60% to Panasonic’s global battery capacity.
Who will the Kansas plant supply?
Multiple customers. Lucid will clearly be one of them.
Is it possible you’d announce another plant in the US by 2024?
We’re very much concentrated in Kansas, of course, we want to get that right. We’ve taken the technology, but now we actually have done the scaling up. That’s what makes our position really quite prominent in the industry: 66 batteries a second, it’s a lot of batteries. That’s 2 billion batteries a year. And we know we probably can do that. So Kansas takes us to that next stage.
There was that whole beauty pageant between Kansas and Oklahoma to win that plant, each state was throwing incentives at you. Is there still potential for a plant in Oklahoma?
We estimate we’ll grow roughly fourfold by 2030. So yes, there’s definitely potential for other plants in the US.
Profit margins on battery manufacturing are pretty thin. Does the Inflation Reduction Act help you make battery manufacturing profitable, and does it make the US the undisputed place you want to build?
What the IRA does, it gives the opportunity for people to invest in the infrastructure, to then be able to create the economy of scale that you need. It helps us give that little bit of a step up against other parts of the world, that are maybe five years ahead of us.
Is the rise of lithium iron phosphate (LFP) batteries a threat to your market share? We saw Tesla and Ford do deals with CATL as nickel prices rose.
We don’t make LFP. We focus very much on cylindrical batteries — that’s more of the high-end, very powerful cars, large SUVs, and quite frankly luxury-style cars.
Thinking about the US market, is there one cell format or chemistry that you think is going to become dominant in the next five years or so?
We are very much cylindrical. And we’re very comfortable that there’s a market there for us to operate in, with the technology we have, and our ability to create that scale, which most people will struggle with.
Is solid state going to be this thing we’re always chasing and never really attain? Is Panasonic putting energy into a breakthrough on solid-state batteries?
We’ve got a technology roadmap that takes us one decade, if not two decades ahead. Solid state, I’m sure will find a space, it looks really interesting at the moment. I’m sure there will be a space for that.
So is solid state in your 20-year roadmap?
No, not solid state. Our technology has a 20-year road map that gets pretty damn exciting as you go down that road.
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