Panasonic Unveils EV Battery Plant in Kansas

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1:53Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Ludlow in San Francisco.

2:04This is Bloomberg Tech. I'm Jackie Duvalis here in New York. Coming up, Ed Ludlow is live in DeSoto, Kansas from Panasonic's newest EV battery plant. We'll have the live conversations with Panasonic North America CEO and Lucid CEO Sauer. Plus, Bitcoin soars past$120 ,000 as Congress starts Crypto Week. And Musk says Tesla shareholders will vote on whether to invest in his AI startup, XAI. Let's head over to DeSoto, Kansas, where Panasonic has just unveiled its latest EV battery plant. Ed Ludlow is standing by. What are you seeing, Ed? Yeah, this is a 4.7 million square feet facility that at full capacity, 30 gigawatt hours, enough for 500 ,000 EVs per annum, all powered by these little guys, 2170 cells.

2:57And we're delighted to be joined by Panasonic Corporation of North America CEO Megan Myung-Won Lee, regular contributor to the show. Thank you. But this was the moment. You and I talked about it earlier in the year. Yes. What does it mean for Panasonic in America and American manufacturing of battery technology? So this is more than a 10-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, 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.

3:34Today's a fun and exciting day, and this is a celebration. Full production this year? Yes. So sales are already coming off the line. Yes. Could you just explain the roadmap for the ramp? Because no facility is straightforward, but this is the size of 200 American football fields. How are you going to get to full capacity this year? So we started in November 2022, 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, Lucid and Hexagon truck.

4:18And 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 we're a Japanese company. And when we commit to something, we're fully committed. And we want to make sure that we support all the customers that were committed.

4:59We're not feeling the slowdown yet, and we're very bullish on working with all those customers. When you say you're not feeling the slowdown, 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 slowdown yet. But yet again, I mean, you see this operation. This is a long-term commitment. So there may be some pushback or moving ahead, but we're committed for a long term.

5:42And 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 EV 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 established OEMs as well as startups.

6:26So 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 they're 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?

7:07Lack 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 Lieutenant Governor Toland making some of his speech in not only Japanese but in Osaka dialect. And that level of insight and care and support really made a difference. And it doesn't matter what party they are. They're very committed to bring us here but also make us feel home.

7:55So that kind of partnership, not just numbers and infrastructure, but emotional partnership made a difference. And we're so happy to celebrate today. What I was going to say on the numbers is there is a job creation story. So 4 ,000 direct jobs. I think the number is 20 ,000 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 DeSoto? 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.

8:36So when we start for manufacturing, they are there already taking the courses and be available to take a job here. To guarantee you had the skill sets that you needed. 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$4 billion into this DeSoto facility. but you were also, the reported number is, eligible for almost$7 billion 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.

9:16They're set 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 undo the Inflation Reduction Act. It seems like the$7 ,500 credit which goes to the consumer on the vehicle will go. But the 45x manufacturer credit seems intact. How have you navigated that? Is that your read on the scenario as well?

9:56So we're still very hopeful 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 U.S. So, so far, it's very positive. And we're hopeful that it stays. 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 sell 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 tariff situation, but from COVID.

10:45During 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. And our goal is to complete 50 percent of our supply chain by 2030 to be completely local. Are any of the conditions currently associated with that 45X 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.

11:25Yes, yes, yes. So we started partnering with China and we are for the supply chain resilience. We are trying to diversify and make sure the supply chain is more resilient 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. 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 quality EV batteries.

12:14It's good for everyone. For consumers, we want to make sure those EV batteries are tested and safe. I know this might seem far-fetched. We are just bringing this facility online. Yes. But one of the questions I got from you, from the audience, is what happens next? You have Nevada. Right. You now have Kansas. Does Panasonic see further sites? For EV in the first instance, what is your next priority? It's TBD. Today is 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 that first, and if it goes well, who knows, right?

13:00Demand is still a question. Yes. What I find interesting is a lot of the customer base is pure plate EV, but the lesson we've learned in the last 18 months or so is hybrid is still a big part of the market. Right. 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 rose by like 11.4%. 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 sad with the small ups and downs. We're still bullish that EV markets should grow and hybrid transition should be part of it.

13:45Have you done a sort of side-by-side analysis of the economics of a single cell? Bring mine back out. I have one single 2170 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 fix that the sell 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 your overseas facilities? It makes a lot more economic sense to produce here, right? Bring raw materials here and produce here.

14:24And we're cutting in for some breaking news here. We have President Trump in the White House with the NATO Secretary General Tikalasen. That was President Trump with the NATO secretary general announcing that he was, quote, unhappy with Russia and is threatening secondary tariffs of 100 percent on Russia if a deal with Ukraine is not reached. But first, let's get to some breaking news that crossed the wire. Mark Zuckerberg, Meta's CEO, took to threads to say that the company will invest hundreds of billions of dollars in computing to build superintelligence. Shares rose off the news. And let's get right to that with our very own Kurt Wagner.

15:07Kurt, walk us through this latest investment and how it compares to the previous announcements the company has made. Yeah, so some of this is, as you point out, you know, hundreds of billions of dollars are very eye-catching. I will say that is a number that Mark Zuckerberg has thrown around before. Historically, he said that this is, you know, this drive for AI is going to be incredibly expensive. He's even admitted some companies, presumably his own, will overpay on AI in order not to fall behind. So hundreds of billions on infrastructure. But I think, Jackie, when you look at this, why it makes sense is you recall over these last couple of weeks, they've been spending very aggressively to hire AI talent for this super intelligence group.

15:48And I think this commitment to the infrastructure side is meant to sort of go hand in hand with that. OK, so we've hired the talent. We have the people in the building that we think can build this thing. And now we're putting the money behind the infrastructure to help support them. Kurt, this announcement has fresh resonance, especially as some of Meta's competitors are making their own moves to really bolster their AI ambitions. Talk to us a little bit about what XAI is hoping to do by tapping some of Tesla's coffers. Yeah, so XAI has become like this central hub of the Elon, Inc. universe, right?

16:24We've talked about this historically on this show before, this idea that all of Elon Musk's various businesses sort of work together and help one another. And I think that's just become more and more prevalent, especially as XAI has grown. And so we learned that SpaceX, for example, is now investing$2 billion into XAI. We've seen that Elon Musk plans to put a shareholder vote to Tesla shareholders asking if Tesla should invest in XAI. We obviously know XAI and Twitter already merged or X already merged. So this notion that all of these different sort of businesses of Elon's are now contributing to the AI business, I think is super notable.

16:59And you can see there are some, you know, to use the terrible cliche synergies between these companies, right? The idea that Grok might be distributed through Tesla's is one example of that. But it does feel like Elon is saying, OK, I have these other businesses that are doing well financially. I'm going to take some of that cash and try to use that as jet fuel on my AI startup. Kurt, it really depends on the outcome of this shareholder vote. What is the case that Elon needs to make to shareholders about what it stands to benefit from this move? Yeah, well, I think if you're Elon, first of all, you have a ton of loyal shareholders already, people who want this thing to happen simply because Elon Musk wants it to happen, right?

17:42So you have a pretty strong base of people. But for those who are on the fence, I think what you would sit here and say is, Look, this technology, this AI technology is going to be world-changing, transforming if it hasn't already been the case with self-driving, for example, being maybe the core Tesla example. And so I think if you're Elon, you just say, look, you're putting in money now into a technology that's going to be worth 10, 100 times more down the line. But also you're going to get all of this data, this infrastructure that I'm building at XAI, and it could potentially benefit Tesla as well.

18:15again, as you improve self-driving, as you take Grok, for example, put it into the cars. So if I'm him, I paint this as very much like a rosy marriage between the future technology and putting all of that into an automobile, which I think they're already doing. So I think it's easy for people to wrap their heads around, but it's something he's going to have to really hammer home for those who are skeptical. Kurt, we know that Bloomberg has reported that XAI is burning over a billion dollars a month on its AI efforts. What do we know about how much the company is bringing in and how that compares to its competitors?

18:49Yeah, we don't know much about the revenue of XAI because at this point, they're not really, as far as I know, making much money outside of, you know, Grok is, for example, available to subscribers on X. There's probably some kind of financial arrangement, or at least there was before the merger, where, you know, each subscriber sort of pays for a little bit of Grok. But I do think this is going to be the key, right? You're spending a ton of money on here. does this pay off into a real legitimate business moving forward? That's Bloomberg's Kurt Wagner. Thanks for joining us. Coming up, Lucid Interim CEO Mark Winterhoff joins us from the Panasonic EV battery plan in Kansas.

19:24More next. This is Bloomberg Tech.

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22:26Welcome back to Bloomberg Tech. We're live in DeSoto, Kansas at Panasonic's brand new EV battery plant. 4.7 million square feet at full capacity, which will happen later this year. Some news we broke with Panasonic's North America CEO, Megan Myung-Won Lee. 30 gigawatt hours of capacity. That's enough sales for 500 ,000 EVs per annum. One of the key customers, Lucid, and Lucid CEO, Mark Winterhoff, interim CEO, Mark Winterhoff, is with us now. Now, this is a significant moment for you as well because it's your first domestic supply of cells. Reflect on that. That is true. So currently we're getting our battery supplies either from Japan or from Korea, depending on the supplier.

23:10And Panasonic is a great partner for us. We decided two and a half years ago to make together this investment here and to localize the production, the cell production here to Kansas. It's not just volume supply. This is 2170, but my understanding is there was some co-engineering to make this as good as it can possibly be. Explain how that works. It's a great collaboration between our engineering departments and their engineering department. We bring in a lot of experience on what the cell is supposed to do in real life, and they make it happen with chemistry and with all of the parameters of the cell.

23:47So it was a really, really great collaboration. and that we also then are able now to produce this here locally, obviously in the current climate helps us a lot. How do the economics of the DeSoto Candace May 2170 stack? I know that you love charts and spreadsheets as much as I do, but you must have done that analysis. Oh, yeah, absolutely. What's it like? I would say we wouldn't have done it if it wouldn't be economically feasible or beneficial. As I mentioned before, we made that decision not just recently. So tariffs were not on the radar screen at that time. We did that decision two and a half years ago.

24:28And at that time, together with the 45X incentive, the tax credit, the economics make sense. I still have to say, and I hope the Panasonic hears that, that there's some room of improvement. But also right now, obviously, with the tariffs, this is a very good move for us. because the same cell that would otherwise have come from Japan or Korea is subject to tariffs. It is. That's a part of the equation. That is correct. And the other thing that we are currently working on together with Panasonic is obviously further localizing the supply chain for the cell because it doesn't do you a lot of good if you manufacture here, but you still import the raw material, which is then subject to tariffs.