In a strategic move amidst concerns about the slowing electric vehicle (EV) market, Panasonic Energy, a key battery supplier to Tesla, is considering a significant investment expansion in Kansas. 

Despite the hurdles the drop in EV demand faces, the Japanese electric car battery manufacturer is considering extending its production capacity in the US state. 

Panasonic's Expansion Plan

Sources told Nikkei Asia that Panasonic Energy's potential investment, internally dubbed Phase 3, could see the addition of production lines in Kansas, particularly in the city of De Soto. This expansion initiative mirrors the scale of the ongoing construction of the De Soto plant, a project estimated to cost the company around $4 billion.

The decision-making process regarding Phase 3 is still in its early stages. While sources indicate that Panasonic Energy is considering the expansion, no final decision has been reached. The company is meticulously evaluating various factors before committing to this endeavor.

One of the focal points of this potential expansion is the production of cutting-edge 4680 batteries. These cylindrical lithium-ion batteries boast an energy capacity five times greater than conventional 2170 batteries. 

With higher energy capacity, fewer batteries are required per vehicle, leading to faster production rates. Panasonic Energy aims to cater to the growing demand for these advanced batteries, primarily driven by its key client, Tesla.

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A Downtrend in the EV Market

Despite the current slowdown in EV demand, Panasonic Energy remains optimistic about the prospects of the EV market.

While the decision on Phase 3 is expected to be made by the end of the year, Panasonic Energy is actively assessing the production efficiency of the 4680 batteries. These batteries are currently undergoing testing at a factory in Wakayama, Japan, indicating the company's commitment to ensuring operational excellence before proceeding with further investments, Electrek reports.

Expanding production capacity is considered when EV sales are experiencing a dip in various markets. Although a record 1.2 million EVs were sold last year in the United States, the growth rate has significantly slowed compared to previous years. Similarly, in the European Union, monthly sales of new EVs experienced a decline for the first time in almost two years in December.

Panasonic Energy's investment deliberations are also influenced by reports of rising construction costs at its De Soto site. However, the company's confidence in Tesla's steady battery demand remains unwavering. Despite Tesla's reported decreased operating income in recent quarters, the company continues to exhibit strong demand for batteries, especially the advanced 4680 cells.

In line with its long-term growth strategy, Panasonic Energy aims to quadruple its EV battery production capacity by 2031, focusing on expanding operations in North America. 

While discussions with the Oklahoma state government regarding investment opportunities ceased without a clear explanation, the company remains committed to capitalizing on the lucrative opportunities presented by the EV market.

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