Panasonic Is Investing $3.86 Billions In Tesla

Tesla's Gigafactory

Panasonic is one huge and very successful company. They slowly developed technology which is good enough for Tesla Motors and they now have the exclusive right to supply Tesla Motors with lithium ion batteries. We have already known that Panasonic has a good business relationship with Tesla but their most recent move caught us off guard.

We have already informed you about Tesla’s plans for Gigafactory. For those uninformed, Gigafactory is Elon Musk’s biggest investment in the auto industry so far. He wants to make a sort of revolution and to bring his electric vehicles available for general population by cutting down prices. That Gigafactory will have all steps of car manufacturing under one roof in order to do that.

The thing that surprised us was the official report. Panasonic will make Tesla Motor’s Model 3 lithium ion batteries exclusively, and it will raise 3.9 billion dollars in corporate bonds to invest into Gigafactory with Tesla. The investment this huge has to have some really durable backbone in order to be sustainable for a longer period of time.

Panasonic has “pledged” itself by contract as a principal partner with Tesla. The goal of the partnership was (is) to substantially reduce the price of long-range battery packs and to establish a facility which could mass-produce electric vehicles.

A Tesla Model S lithium-ion battery pack

Since Panasonic sees automobile industry as a potential “wind in their sails”, the main priority is a successful Gigafactory. There is no evidence that can point to something bad in the production, but this investment is too large to be a mere partnership obligation. We already know that this is a big investment, and one of the greatest risks, Elon Musk has ever made, but can this be a hint that something bad is happening? Maybe the expenses grew too much for Tesla?

Let’s look at this situation from an economy point of view

After Panasonic raised 3.9 billion dollars from bonds to help Tesla’s Gigafactory, they immediately felt the 13 percent decrease in their profit and 5.9 percent drop in their total revenue, to about 17 billion dollars. The official report is that they believe the drop is caused by their deal with Tesla, but only partially. The main headquarter is in Osaka, Japan but they have special department only for automotive industry called Panasonic Automotive Systems Co. That department, solely, has the estimated revenue from auto parts sales of about 10 billion dollars in its 2015 fiscal year. So is their profit decrease important? Is it even noticeable?

Panasonic is a corporation with a long history. Their roots go before any of us were even born and they handled every situation, every crisis, even great war without stumbling. They went into this business with Elon Musk, with capital large enough to decrease their profit by a tenth in a second. But they did this for their long-term growth.

Tesla Motors is not a single company in Elon Musk’s hands. Everything that he has created brought him a great deal of money, but there were no easy steps. Every decision he made about his business was risky. We all looked at him in wonder, as he was spending millions (he earned by selling PayPal) creating his Roadster, and he earned billions by making that risk. Then he started building rockets and telling people he will go to Mars, and we laughed. A couple of months ago the entire USA filmed with their cameras some “meteor” going slowly into the atmosphere, but nobody knew that was Elon Musk’s rocket going back to its landing platform. Even NASA is using his rockets, so nobody is laughing now.

Historically and for the sake of future, we can only say that Panasonic has chosen the right ally in this silent war of economics. They couldn’t have chosen a better partner. And if they decided to back them up, that can only be a proof that there is nothing to worry about. In the end, only time will tell us if there is something “fishy” going on with Gigafactory and the future of Tesla. Or maybe we will never find out. For now, we can only sit, enjoy and wait for the next story.