Photo courtesy of Reuters.

Panasonic's Big Bet: Greener Cars, Smarter Cars
| published October 30, 2014 |

By Thursday Review staff

There was a day in the not-too-distant past when the Japanese manufacturing giant Panasonic was in nearly every American’s home—and most likely in the form of consumer electronics: televisions, videotape players, video tape, phones and answering machines, and stereo equipment.

But over the last ten years the venerable company founded in 1918 and known for a large part of the 20th Century as Matsushita Electric Industrial (it officially became “Pana-Sonic” in the 1950s, though by the beginning of the 1960s it sold scores of products under other names, including Curtis Mathes, Emerson, and Technics) has taken a beating in the consumer electronics market. Panasonic has lost ground to arch-rival Sony—once its closest competitor in many areas, including professional television and video equipment—and to Samsung and Sanyo. Panasonic has also seen its share of sales drop in direct proportion to the rise of Apple, LG and others.

But Panasonic still has a few tricks up its sleeve, and it intends to position itself at the leading edge of what it hopes will be the markets of the immediate and distant future: batteries for electric cars, smart cars, and self-driving automobiles—complex and overlapping markets which some business analysts say hold a vast and nearly unlimited potential for any company willing to take the initial risk.

Panasonic is already there. For one, it plans to fuse its already formidable knowledge of high-end electronics with its versatility with optics and lenses to invest deeply in smart car technology; smart cars and driverless vehicles will require both tactile and visual skills still relatively exotic for the typical American carmakers. Hoping to stay ahead of other out-of-the-box car makers—Google’s smart cars, and Tesla’s several models of battery-powered cars—Panasonic will scrap or slowly roll back its interests in things like DVD players, home theater systems, and headphones. In fact, Panasonic is so sure of the smart car market expansion that it will invest tens of millions of dollars in Elon Musk’s Tesla in the form of battery development—a partnership it says it already beginning to pay off.

By contrast, Panasonic will dump—almost immediately—its unprofitable division responsible for plasma TVs. It will also quickly scale back underperforming lines of electronics, many of them with roots in the pre-digital age and early aught years. Consumer products, Panasonic calculates, are subject to volatile economic conditions and sometimes fickle tastes—a slight edge toward recession or stalled wages, and most middle class consumers will think twice about that new TV, camera or Blu-Ray player. Panasonic’s website displays literally hundreds of products, including power tools, home security systems, and electric shavers—and no doubt many of these products may quickly become wasteful cul-de-sacs for the Japanese conglomerate.

Panasonic sees the future highway for energy-smart cars and self-driving cars—literally—as an open road, about as unencumbered a market as one could find, especially as governments worldwide face increased pressure to reduce carbon footprints and greenhouse gases. The driverless car, for example, is expected to accomplish both improved efficiency and greater safety—drivers behind the wheel are inefficient and prone to error. Cars with the right kinds of lenses, sophisticated optical software, and smart firmware would take the erratic behavior of drivers—passive, aggressive, angry, confused, distracted—out of the equation, making things safer and, it would be hoped, much more fuel efficient.

But it is Panasonic’s widely-touted partnership with Tesla that may prove to be Panasonic’s riskiest—but smartest move. In late July the two companies announced plans to break ground on a massive battery factory, possibly the largest ever built. Tesla has termed it the Gigafactory, and the facility, when completed, will produce thousands of Lithium-ion batteries and other high-tech power packs. Panasonic will produce the battery cells and other raw parts; Tesla will manage the facility and put the finishing touches on what rolls off the assembly lines for the North American market. Panasonic, according to some business reports, may invest as much as $200 million up front. Tesla plans to spend $2 billion (that’s billion with a B) to make the assembly facility a reality.

For Tesla’s Elon Musk, the giant plant will put the final puzzle piece in place for what he hopes will be a highly profitable future for battery-powered cars (Musk has made no secret that the supply of batteries has stymied production and hampered sales of his Tesla cars). For Panasonic, the partnership with Musk may prove to be its most profitable move since it went—shrewdly and guns blazing—into the VHS market back in the early 1980s.

Related Thursday Review articles:

Tesla’s Open Source Gamble; R. Alan Clanton; Thursday Review (Archives); June 18, 2014.

Taxing the Green Driver; R. Alan Clanton; Thursday Review (Archives); June 28, 2014.

Will Automatic Braking Become Standard?; Thursday Review staff; (Archives); May 30, 2014.