Panasonic shares plunge after profit warning, Tesla's big Maxwell deal

TOKYO — Panasonic shares fell almost 6.5 percent on Tuesday after the electric vehicle battery maker reported a drop in quarterly earnings and cut its full-year outlook, just as EV partner Tesla branched out in battery tech.

The Japanese firm on Monday chopped 9 percent from its operating profit outlook after booking a 19 percent drop in October-December, blaming weak demand for auto components and factory equipment in China, where the economy is slowing.

Both figures were far below analyst estimates.

Later on Monday, EV maker Tesla said it had agreed to buy U.S. energy storage company Maxwell Technologies for $218 million in an all-stock deal that could help the electric car maker produce batteries that hold more energy and last longer at a time when it needs to cut costs and faces growing competition.

Maxwell executives told investors in January that it had developed and patented a "dry electrode" technology that could significantly increase the driving range and reduce the cost of electric vehicle batteries. In a presentation, Maxwell said it expected strategic alliances "within six months" centered around this technology.

The company also makes ultracapacitors, which discharge energy faster than batteries and are seen as complementing battery technology.

Ultracapacitors, combined with the energy of batteries, can enable rapid response times, function across a broader temperature range and lengthen battery life by up to two times, according to a blog post on Maxwell's website.

Volvo-owner Geely Holding Group last May announced a deal with Maxwell and described the company's ultracapacitor technology as helping to deliver "peak power" for hybrid cars.

"Tesla needs Maxwell's solvent-free battery electrode manufacturing for a viable path to lower battery costs," said Craig Irwin of Roth Capital Partners. "Real competitors are coming now, so Tesla needs to move fast."

Maxwell sells ultracapacitor cells to General Motors and Volkswagen AG subsidiary Lamborghini.

Panasonic is the exclusive battery cell supplier for Tesla, which in turn is Panasonic's biggest EV battery client. The Japanese electronics firm also makes types of ultracapacitors.

Industry analysts in Japan pointed to Panasonic's outlook as the main source of investor concern on Tuesday, saying the Maxwell deal's impact on Panasonic was as yet unclear."The latest earnings have revealed how tough the situation is for Panasonic," said analyst Masahiko Ishino at Tokai Tokyo Research Center.

The Maxwell deal comes as Panasonic is set to lose its exclusivity with Tesla, whose Chief Executive Elon Musk said the U.S. EV maker plans to source battery cells locally for a new car factory in Shanghai, "most likely from several companies.

"Panasonic has shifted toward products such as automotive batteries and cockpit systems for corporate clients and away from low-margin consumer electronics, but "it's clear it's suffering in business-to-business areas as well," Ishino said.