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Panasonic is best known for being an important Tesla supplier. But it makes many more parts of a car than just electric car batteries. The Japanese electronics group has announced plans to sell part of its automotive systems business to US private equity group Apollo Global Management. The deal will help it keep up with the fast-changing battery industry trends.
The unit — focused on components such as infotainment systems — could end up being listed, Panasonic said. Details of the proposed deal are due to be hammered out by next March.
The unit accounts for about 15 per cent of Panasonic’s sales for the latest fiscal year. As cars get smarter, there is growing demand for sophisticated components, including head-up displays, smart rear-view monitoring systems and driver monitoring systems. Valued at an industry multiple, Panasonic’s automotive business would be worth about $11bn.
But, in the future, the biggest rewards in the auto components sector lie in electric car batteries. Here, Panasonic remains among the top global suppliers. But it must keep investing heavily in new technologies and capacity to keep up with rivals. The sale would free up ample cash for Panasonic to invest in rapidly changing battery technology.
The move comes as demand weakens for Panasonic’s consumer electronics and factory automation equipment in some markets including China. Its record net profit of ¥288bn ($1.9bn) for the six months to September benefited from a large US government subsidy for its electric car battery business. It recently downgraded its profits guidance. It now expects annual operating income growth of 39 per cent, compared with an earlier forecast of 49 per cent.
For now, the battery business accounts for about 12 per cent of Panasonic’s group profit — not far off that of its automotive systems business. But as the electric car market grows, batteries should make an outsize contribution. Panasonic is making the right bet.