Asian suppliers’ stocks slump on Tesla’s aggressive plan to make cheaper batteries


Shares of Asian battery suppliers fell on Wednesday after Tesla Inc TSLA.O unveiled a plan to halve the cost of its electric vehicle batteries and bring more production of the key auto component in-house.

The fortunes of battery makers in South Korea, Japan and China are linked to Tesla, the EV market leader, supplying its factories in Nevada and Shanghai.

Tesla CEO Elon Musk on Tuesday outlined a plan at the company’s closely watched “Battery Day” to aggressively boost production of its own batteries and cut battery costs as it looks to deliver affordable electric cars.

Shares in South Korea’s LG Chem 051910.KS slipped 4.5% in morning trade, after initially opening higher, while Panasonic 6752.T fell 4%. China’s CATL 300750.SZ was down 2% after initially falling as much as 4%.

Analysts said Tesla’s plans could limit longer-term sales growth of suppliers to the market leader, while Musk’s comments indicated the company will put pressure on suppliers to lower prices.

“Tesla’s move would be disadvantageous to battery vendors,” said Rho Woo-ho, an analyst at Meritz Securities.

“Tesla will have more power in negotiating prices and therefore overall battery costs will fall further. This is not a good signal to battery vendors in Korea and overseas.”

Tesla said the company has started ramping up production of its new batteries at a pilot line in Fremont, California, but productivity is not high and Musk acknowledged the difficulty in scaling up production.

“Even Musk, who has a track record of overpromising, said it will take a long time to mass produce its new batteries,” said Han Sang-won, an analyst at Daeshin Securities in Seoul.

“I think Tesla is sending signals to suppliers that they have to lower prices too.”

Musk said Tesla aimed to rapidly ramp up battery production by 2030, to 3 terawatt-hours a year, or 3,000 gigawatt-hours — roughly 85 times greater than the capacity of its Nevada plant.

He promised to cut electric vehicle costs so radically that a $25,000 car that drives itself will be possible, but not for at least three years, disappointing investors who cut $50 billion off its market value.

Tesla currently produces batteries in partnership with Panasonic at its Nevada factory, while LG Chem and China’s CATL supply cells to its Shanghai factory.


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