Megan Myungwon Lee Talks Panasonic North America's New EV Battery Plant

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This is a four point seven million square feet facility that at full capacity thirty gig or what hours, enough for five hundred thousand evs, but animal powered by these little guys twenty one to seventy cells. And we're delighted to be joined by Panasonic Corporation of North America CEO Megan meong on Lee, regular contributor to the show. But this was the moment you and I talked about it

So this is more than a ten year vision. We wanted to do this and we wanted to go big in this market. So we had a commitment and we started in Reno and Nevada and this is our factory that we're diversifying our EV strategy and we're going to be full production this year and it's really exciting. Today's a fun and exciting day, and this is a celebration.

Full production this year, so sales are already coming off the line. Could you just explain the roadmap for the ramp, because no facility is straightforward, but this is the size of two hundred American football fields. How are you going to get to full capacity this year?

So we started in November twenty twenty two, two and a half years ago, and it was all flat field and it was a massive land and we started the construction and we started the production and testing last week. And we're going to produce the batteries this year. And you probably saw the cars that we have in Display and Tesla, Lusid and Hexagon truck and we're really excited to work with different suppliers and partners and clients this year.

We're going to discuss in detail those customers. They're really key to this. There were media reports Friday night that there would be a delay in reaching full capacity and what the report stated was that was due to demand. Are you able to comment on that report? And it sounds like they were misinformed. If you are going to hit full capacity this year, I.

Do think it was misinformed and very We're a Japanese company and when we say when we commit to something, we're fully committed and we want to make sure that we support all the customers that were committed. We're not feeling the slow down yet and we're very bullish on working with all those customers.

When you say you're not feeling the slow down, that means that you're seeing consistent orders from those key customers or they're still committing to orders in advance.

What do you mean by the definition of what you just said.

So we have the operation in Reno and that's going very healthy, and we're seeing the commitments coming in for this facility as well. So we're not feeling the slow down yet. But yet again, I mean, you see this operation, this is a long term commitment, so there are may be some pushback or moving ahead, or we're committed for a long term and we're not shying away from those from time to time challenges.

Throughout the morning, there was a lot of discussion about Tesla because Tesla makes the best selling ev model in the world this specific facility, does Tesla dominate the proportion of output or is it more evenly split across your different customers.

So we're working with Tesla for sure, and we're working with Lucid and Hexagon and other clients. So it is to diversify our EVN manufacturing in the United States.

What do you mean by diversify move away from one sort of core customer.

No, not really. We're expanding right so we're definitely working with Tesla, but we want to work with other establish the OEMs as well as startups. So it's part of our efforts to expand our strategy and manufacturing output as well.

What signals has Tesla given you about its future orders, about the health of its business.

Your guess is as good as mine. But we have a long term relationship, longer than anyone else, and there's still a very important strategic partner for us, and I believe our partnership is very strong.

Throughout the morning, there was a lot of discussion of how Kansas was the absolute best candidate. What were the biggest factors in choosing this site? Were they financial? Were they simply the ability to get things done? Lack of red tape? Why were you able to move so quickly?

So we talked about the available workforce and the infrastructure. I mean you saw the power lines built by the factory and as well as the energy procurement that we can do. But more than anything, there was something very special about Kansas. All the officials were able to work with us, and you probably heard that Lautana Governor Toland taking some of his speech in not only Japanese but Osaka dialect, and that level of insights and care and

What I was going to say on the numbers is there is a job creation story. It's four thousand direct jobs. I think the number is twenty thousand indirect jobs. When you take into account supply chain construction, what have you had to do to kind of bring the other infrastructure you've needed to de Soto have everything you need around you?

So what was great about planning it out? Like I said, we started two and a half years ago, and at that time we worked with local schools and community colleges to create curriculums so when missed for manufacturing, they are there already already taking the courses and be available to take a job.

To guarantee you had the skill sets.

Absolutely absolutely, So we created curriculum together and it's been a really good partnership and it helps us and it helps the community and it's like wonderful win win.

The headline figure was that Panasonic put four billion dollars into this foot to Sodo facility. But you also the reported number is eligible for almost seven billion dollars from the Inflation Reduction Act.

How much of that materialized.

We haven't started the manufacturing here, so we have not seen the incentives yet.

They're setting against milestones.

Yes, yes, so it comes with the production. So we're looking forward to it and it's definitely a big part of our investment.

Do you anticipate that you will get access to the full tranche of money?

We certainly hope.

So things have changed, I mean things have changed even since you and I spoke in January.

There is some.

Effort underway to reshape or or undo the Inflation Reduction Act.

It seems like the seventy five.

Hundred dollars credit which goes to the consumer on the vehicle, will go, but the forty five x manufacturer credits seems intact.

How have you navigated that? Is that you'll read on the scenario as well.

So we're very still a vehicle fall that should remain and I think it should remain it's not only for us, but it's for creating jobs and manufacturing and bringing technology to us. So so far it's very positive and we're hopeful that its stay is it will be a big part of our long term strategy.

What's the supply chain story right now for DeSoto, Kansas? When you think about your raw material needs and everything that goes into the cell process, are there things that are still difficult?

What are they?

Or has bringing this facility online been smoother because of policy?

We have been planning for the supply chain resilience, not just for this and recent terrificuation, but from COVID. During COVID, we really suffered from weak supply chain. I mean, I think all the industry did, and so did we. So we've been planning for supply chain resilience and we are I mean just for our benefit too, to make sure that those supply chains stay local and within the North America.

Are any of the conditions currently associated with that forty five x manufacturer credit difficult? When you think about foreign entity of concern or parts of the supply chain, which in the context of metals like China, is still a factor.

Yes, yes, yes, so we started partnering with China and we are for the supply chain resilience. We are trying to diversify and make sure that supply chain is more Zulians to make sure that we can procure and process on site. So it's not really a new change for us necessarily, We've been trying to do that for a few years.

Where are the bottlenecks right now? If any, I don't know.

It's really the refining process, to make sure that we can find a supplier who can make sure that quality is there. Right the refinement, the quality matters for our quality production. So that's where we pay most attention to make sure that the raw material is ready for EVY batteries. Right, it's good for everyone, for consumers. We want to make sure those av batteries are tested and safe.

I know this might seem far fetched. We're just bringing this facility online. Yes, but one of the questions I got from you from the audience is what happens next you have the Vada you now have Kansas. Does Panasonic see further site for ev in the first instance, what is your next priority.

It's TBD. Today's the first day of this operation and we're really excited to make sure that this goes smooth, producing quality EV batteries. We'll focus on their first and if it goes well, who knows right?

Demand is still a question.

Yes.

What I find interesting is a lot of the customer basis pure play EV. But the lesson we've learned in the last eighteen months or so is hybrid is still a big part of the market, maybe in a way that surprised many. Do you have the ability to tap into demand for hybrid from this facility or others.

We don't know yet, but we're pleasantly surprised that eb sales still rows by like eleven point four percent, So that's a good sign. And like I said, this is a long term play, so we're not going to be happy and said with the small ups and downs, we're still bullish that ebie markets should grow and hybrid transition should be part of it.

Have you done a sort of side by side analysis of the economics of a single cell?

Bring mine back out. I have one single twenty one.

Seventy cell here, so this will be manufactured in Kansas, not subject to tariffs. You have the Nevada facility, but Panasonic Energy also has facilities all around the world. Is it just an instant fixed that the cell on a unit basis is just a more attractive economic proposition if it's built here in Kansas for the American market versus shipping cells in from EU overseas facilities.

It makes a lot more economic sense to produce here, right, Bring raw materials here and produce here.