Tesla supplier Panasonic was once best known for its liquid-crystal display TVs. In the past decade, its focus shifted to electric car batteries. The pivot has so far paid off handsomely. Yet it now risks ramping up investment too far too fast.

The Japanese electronics group is planning to more than double capital spending for the fiscal year to March to a record Y700bn ($5.1bn). More than half that sum will be spent on boosting electric car batteries production.

It is an ambitious plan for a company that has slim operating margins of just around 3 per cent. US tax credits account for a large chunk of this year’s net profit increase. Shares are up by more than a third this year, but still trade at a significant discount to regional electric battery-making peers, at 12 times forward earnings.

The shift to electric car batteries has been the right strategy. Panasonic has become the world’s fourth-largest maker and one of Tesla’s biggest suppliers. Most of its batteries are supplied to the US car company. As a result, it has invested heavily in the US. It has a plant in Nevada and is spending as much as $4.3bn for another in Kansas.

Placing heavy bets is a signature trait of Panasonic. Its record profits in 2008 was a result of similar all-in bets on plasma and LCD televisions. But its heavy investment in production capacity ended in failure after Chinese competitors piled into the market. Panasonic ended up withdrawing from all LCD panels production in 2021. It also withdrew from solar cells and sold its semiconductor business.

A battery investment bonanza is under way fuelled by subsidies and shortages. But the excitement may drain as quickly as the charge of an electric car in cold weather. Chinese competitors including BYD and CATL have grown market share rapidly in recent years. The latter is reportedly Tesla’s chosen partner for its US battery plant. Panasonic, too, should spread its bets.

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