TOKYO—Finally, Japanese businesses have come to realize that in the modern era, the economy of scale matters far more than in the past, when the Japan juggernauts went after steel, computer chips and autos – as the Koreans and more recently the Chinese are doing for smart phones and other consumer products.
Toyota Motor Corp. and Panasonic Corp., the main battery supplier for Tesla Motors, would formally announce a joint battery manufacturing venture later this week, Japanese media reports said Jan. 21. Toyota would hold 51 percent and Panasonic 49 percent of the joint company, the reports said.
Japan Inc. as a whole pursued an old merchant teaching of producing as much as possible and sell as low as possible prices through the late 1980s, when the country was told by the United States that selling below fair market values constitute antitrust law violations. In response, Japanese manufacturers of steel, radios, televisions, semiconductors, and automobiles swung their business models to one that touts quality ahead of quantity.
The Koreans, first Samsung for semiconductors, then televisions and now smart phones, and later Hyundai for cars, lost no time in spotting that Japanese paradigm shift, jumping into the market underselling comparable Japanese products.
Toyota and Panasonic must have realized that the economy of scale matters far more in business than they previously thought. They had been exploring how to structure the joint venture since 2018. Questions they are asking themselves are how to clear antitrust regulators, what to do about Panasonic’s manufacturing plant in China, whether the joint venture should supply to Tesla, and where to locate the joint venture’s mother plant. Panasonic’s China plant currently manufactures lithium-ion batteries for Tesla.
Even with the launch of the new company, it’s unknown whether it can compete with China’s CATL, the world’s largest lithium-ion battery manufacturer. Panasonic is the world’s second largest maker. For the joint venture to succeed, the two companies need to woe other Japanese and possibly foreign automakers to join, such as Honda Motor Co., which depends on the small GS Yuasa Co. for battery supplies and Mitsubishi Motors takes supplies from Lithium Energy Japan, a joint venture of Mitsubishi Corp., GS Yuasa and MMC. Nissan Motor Co. had sold off its battery joint venture with NEC Corp. to China and is getting supplies from China’s CATL. Honda in 2018 signed agreement to jointly develop next-gen batteries with General Motors.
Toshio Aritake
(We welcome comments from readers. Send email to: aritake@biglobe.jp)
Reuters article on Toyota-Panasonic joint venture follows:
TOKYO, Jan 21 (Reuters) – Toyota Motor Corp and Panasonic Corp are set to launch a joint venture next year to produce batteries for electric vehicles (EV) in an effort to compete with Chinese rivals, a source familiar with the matter said.
The joint venture, to be owned 51 percent by Toyota and the rest by Panasonic, could also provide batteries to Toyota’s EV technology partners Mazda Corp and Subaru Corp , the source said on Sunday.
The source declined to be identified because the talks on the joint venture are private.
A joint venture would build on the agreement that the pair announced in late 2017 on joint development of batteries with higher energy density in a prismatic cell arrangement.
A Toyota spokesman said the two companies have been working on the battery partnership announced in 2017 and declined to comment further. Panasonic made the same comment in a statement.
The two companies may announce the joint venture plan as early as this week, according to the source.
The battery joint venture will help Toyota achieve an annual sales target of around 1 million zero-emission battery EVs and fuel-cell vehicles (FCVs) by 2030.
It will also give Panasonic cost and scale advantages in battery production at a time when China’s Contemporary Amperex Technology has grown to be on par with the long-time industry leader on the back of the rapidly growing home market.
Panasonic, the exclusive battery cell supplier for Tesla Inc’s current production models, could also reduce its heavy reliance on the U.S. EV maker whose production delays previously weighed on the Japanese company’s earnings.
Panasonic is set to lose its exclusivity as Tesla plans to source cell production locally at a new auto plant in Shanghai, “most likely from several companies” including Panasonic, Elon Musk, Tesla chief executive, tweeted in November.
The reported joint venture plan boosted shares of Panasonic by as much as 4 percent on Monday, whereas Toyota shares were almost flat.
Under the planned joint venture, Panasonic would shift most of its prismatic battery-related equipment and facilities in Japan and China to the joint venture, while those producing batteries for Tesla will remain under the company, the source said.
Panasonic already makes prismatic batteries for Toyota, whereas for Tesla it makes cylindrical batteries of a type similar to those used in laptops.
It’s not clear yet how Panasonic would supply its prismatic batteries to other automotive clients, which include Honda Motor and Ford Motor. (Reporting by Makiko Yamazaki and Maki Shiraki; Additional reporting by Takashi Umekawa; Editing by Michael Perry and Muralikumar Anantharaman)