Panasonic Says Gigafactory Profit in Sight as Tesla Ramps Output

(Bloomberg) -- Panasonic Corp. is on the verge of turning a profit at the giant U.S. battery factory it operates with Tesla Inc., finally yielding returns for a Japanese company shelling out billions to make power cells for Elon Musk.

Panasonic already makes money on batteries for the Model S and Model X, which it produces domestically, President Kazuhiro Tsuga said in an interview. It’s now ramping up output at the two-year-old Gigafactory in Nevada, which is dedicated to making batteries for the Model 3 but still losing money, he said.

Panasonic Says Gigafactory Profit in Sight as Tesla Ramps Output

“We will be in a position to deliver profits at a very early stage,” Tsuga said, declining to specify a timeline. “There is no doubt about it, once we complete the current build-up.”

Panasonic’s investment in the Gigafactory will exceed 200 billion yen ($1.8 billion) once that expansion is done, Tsuga said. His bet on Tesla has been a source of concern for investors amid setbacks, as well as the delayed production of Model 3 sedans and the erratic behavior of Musk. Tesla last week reported a surprise quarterly profit, inspiring optimism that the EV maker will become a sustainable business.

Read more: Panasonic Falls After Profit Misses Estimates on Tesla Outlays

Panasonic produces cells, which Tesla uses to make battery packs for its EVs. The Osaka-based company currently has 11 production lines operating at the Gigafactory and is adding two more by the end of the year for a combined capacity of 35 gigawatt-hours. As Tesla rapidly increased Model 3 production, Panasonic dispatched more than 300 people to Nevada to make sure it can keep up. That made it difficult to assess profitability, Tsuga said.

“Once things settle down, you can control profit on line-by-line basis,” he said. “The first 10 lines are pretty much already there.”

Panasonic Says Gigafactory Profit in Sight as Tesla Ramps Output

The company’s Tesla operations will begin to contribute to profit from the current quarter, Panasonic Chief Financial Officer Hirokazu Umeda told reporters in Tokyo Wednesday. The overall energy division, which also makes batteries for other carmakers, posted a 7.3 billion yen loss in the three months ended Sept. 30. Sales rose 33 percent. Its shares ended Thursday down more than 5 percent at their lowest in almost nine months.

“We are finally at a place where we can move in lock-step with Tesla and make as many batteries as they make cars,” Tsuga said. “It’s a relief, because they went through hell this September. And so did we.”

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