Very Interesting Panasonic news filtering its way across the Pacific Ocean

It's hardly surprising to see a Japanese battery maker be rather cool towards an announcement that Tesla is about to announce plans to build a battery factory in China, or to partner with a Chinese battery maker to do so. In fact, I'd say that "cool" is rather an understatement. The Japanese regard open displays of emotion as shameful, but we can be pretty sure that behind the scenes they are very unhappy at the prospect of Tesla -- their #1 customer for batteries -- developing a rival major source for its batteries.

The ancient and ongoing enmity between China and Japan certainly figures into this, as well as the much more recent move by China to impose restrictions on EVs made with batteries sourced outside China, as well as (if my understanding is correct) completely blocking sales of any EV made with batteries from S. Korea. Not that the ban on S. Korean batteries will affect Panasonic directly, but if China moved to block batteries from that country, will a similar block against Japanese-made batteries be far behind?

As far as Panasonic's hesitancy to invest further in its partnership with Tesla, well that's nothing new. Tesla had to alternately cajole and threaten Panasonic to get them to -- reluctantly -- agree to invest what will eventually be billions of dollars in Tesla's Gigafactory One. And even after Panasonic finally agreed, they have said their investment will be made in installments, and at each stage only if certain production goals are met by Tesla. (However, it's at all unusual for investments to be done in stages, with milestone achievements required before each stage. IMHO this merely indicates prudence on Panasonic's part.)

As far as what this indicates for the future of the Tesla-Panasonic relationship: At least in the short term, I don't think it means much at all. The two companies need each other too much to end or seriously damage the partnership. Panasonic gets too much income from Tesla buying batteries to break that partnership, and Tesla has too much invested in Gigafactory One, where the only battery cell supplier for the Model 3 is Panasonic. If Tesla decided to shift to another supplier, it would take years to build up to a level of supply that could match what Panasonic is now selling Tesla.

Let's remember that Panasonic is by far the #1 global supplier of EV batteries, and let us also remember that most of those batteries go to Tesla. Breaking the partnership would be an utter disaster for both.

Long term... it certainly could be that Tesla will shift towards using batteries from China. At the very least, once Tesla has its China Gigafactory producing cells in quantity (which will likely take at least a couple of years, if not longer) it can play the two suppliers off against each other to negotiate a lower price. Panasonic must realize this, and of course that is one of the reasons they are unhappy at the prospect of Tesla announcing a new Gigafactory in China.

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