Asia’s electric vehicle battery makers come with added Trump risk

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Tesla-supplier Panasonic has successfully positioned itself as one of the biggest battery makers for electric vehicles in the US. The US market has helped to boost group profit and the Japanese electronics group has increased investment there.

But the country — and its looming elections — is one of the biggest threats to its business, as president Yuki Kusumi acknowledged on the sidelines of a US technology show this week.

Should Donald Trump return to the White House, it would spell trouble, not just for Panasonic but for all its rivals in Asia. 

With demand from Tesla stable, Panasonic has been investing in expanding capacity in the US. The US EV industry has been growing rapidly thanks to tax credits and funding from Joe Biden’s administration, which wants to boost domestic EV and battery manufacturing.

Overall, about $128bn has been invested since the passage of the Inflation Reduction Act, or IRA, in 2022. EV sales forecasts based on IRA impacts could surpass 4.6mn by 2030, more than double the previous expectation of 2mn, according to S&P Global estimates. Rivals such as South Korea’s LG Energy Solution and SK Innovation have also added new capacity on the back of that law, sinking billions into building US battery plants last year.

This could become a problem, with polls suggesting a tight election this year. Contenders for the 2024 Republican presidential nomination have been less enthusiastic about EVs and have generally favoured supporting fossil-fuel burning sectors. Donald Trump has referred to the “ridiculous all-electric car hoax”. Trumpisms aside, there are concerns that the EV industry boosts China’s economy at the expense of US jobs.

Changes to the scale of government funding for battery makers would be a serious blow to Asian manufacturers. Panasonic’s record profit for the six months through September was thanks in part to the ¥27.6bn subsidy from the US federal government. Its forecasts for a record annual net profit includes a ¥110bn boost in the form of a US subsidy, about a quarter of the total haul.

Shares in Panasonic, up 28 per cent in the past year, reflect hopes that this will continue. Without the US support, a slowdown in consumer electronics demand in Asia and factory automation equipment in China would have taken a bigger toll on Panasonic’s earnings.

Excess capacity in the EV battery sector is already a concern. Production by some 50 battery makers is already on track to exceed demand four times over by 2025. Aggressive investment in new capacity in the US in recent years means that, ultimately, the situation could be worse. But in the coming months, it will be US politics that drives investor sentiment towards Asia’s battery makers as much as anything closer to home.

Lex is the FT’s concise daily investment column. Expert writers in four global financial centres provide informed, timely opinions on capital trends and big businesses. Click to explore