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Toyota Likely to Announce JV With Panasonic for Batteries

Zacks Equity Research

Toyota Motor Company TM, in a joint venture (JV) with Panasonic Corporation, will produce batteries for electric vehicles (EVs), per Reuters. The JV is expected to unveil in 2020, with Toyota holding 51% stake while the rest will be held by Panasonic. Apart from Toyota, the manufactured batteries are expected to be used by Mazda Corporation and Subaru Corporation, the two partners in Toyota’s electric vehicle technology. The official announcement for the JV is expected to take place this week.

Toyota announced its plan to develop batteries with Panasonic in December 2017. This decision will ramp up Toyota’s vehicle production, enabling it to reach the set target for green cars to comprise half of its global sales by 2030. This collaboration is in addition to the already existing agreement with Panasonic that offers lithium-ion prismatic batteries for Toyota’s vehicles.

Under this new collaboration with Toyota, Panasonic will transfer its prismatic battery manufacturing equipment and facilities to Japan and China. The shift will be cost-efficient and advantageous for Panasonic, aiding it to grow efficiently in the fast-growing EV market.

Toyota Motor Corporation Price and Consensus


Toyota Motor Corporation Price and Consensus | Toyota Motor Corporation Quote

Stringent regulations worldwide to reduce vehicle emissions placed automakers in a tight position. All the automakers across the globe are opting for collaborations and JVs to reduce costs associated with technological development and productions. The JV with Panasonic will provide Toyota with more advanced batteries, thereby, ramping up its vehicle production to widen its existence in the EV market.

In fiscal 2019, Toyota is expected to experience a sales downturn in North America due to rising interest rates, hiked tariffs and cyclical downturn beside China’s softening vehicle demand. For the fiscal year, the company expects net revenues of ¥29.5 trillion, reflecting a 0.4% decline over fiscal 2018. Further, net income is anticipated to be ¥2.3 trillion ($21 billion), marking a 7.8% decrease from fiscal 2018. Toyota is set to release third-quarter fiscal 2019 earnings on Feb 6.

Price Performance

Over the past three months, shares of Toyota’s have gained 7% compared with the industry’s increase of 6.5%.


Zacks Rank & Stocks to Consider

Toyota currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader auto sector are Magna International Inc. MGA, Genuine Parts Company GPC and General Motors Company GM. Magna and Genuine Parts presently carry a Zacks Rank #2 (Buy) while General Motors sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Magna has an expected long-term growth rate of 8.5%. Share price of the company has increased 6.6% in the past three months.

Genuine Parts has an expected long-term growth rate of 5%. Over the past month, shares of the company have gained 6.6%.

General Motors has an expected long-term growth rate of 8.5%. Shares of the company have gained 23.2% in the past three months.

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