Panasonic is making a massive bet on electric cars - here's why the CEO says it's a 'slam dunk' investment
New alliances are forming almost every day as companies without a traditional foothold in the automotive space try to get a slice of the pie.
Google is working with Fiat Chrysler on self-driving cars while making next-generation display systems for Volvo; new software startups like Otonomo are shelling out their services to major companies like Daimler; and BMW is partnering with companies like Intel on data collection.
Panasonic is just one of many players collaborating with the auto industry to focus on vehicles of the future.
"Our business has evolved over a period of time, especially in the recent past of going from purely a consumer business to a B2B business," Tom Gebhardt, chairman and CEO of Panasonic's North American operations, told Business Insider.
"There's a number of reasons for that: The commoditization of consumer products [and] the unfavorability in some of the cost models led us to look for better values in-vehicle technologies," he continued.
Working with Tesla and Google
Placing an executive with several years of automotive expertise at the helm of North American operations says something about the company's pivot from consumer electronics to auto tech.
That larger cultural shift came from Panasonic President Kazuhiro Tsuga when he took over in 2012. As Forbes details in a 2016 profile, Tsuga was key to transitioning Panasonic from its failing plasma TV business to other revenue streams, like in-flight entertainment systems in planes and electric cars.
Panasonic isn't stretching too far from its roots when it comes to this kind of vehicle tech. Gebhardt noted that Panasonic had a presence in the car radio business starting in 2008, giving it a natural introduction to multimedia displays with its electronics background.
Gebhardt said Panasonic is channeling resources toward digital cockpits and vehicle entertainment systems as self-driving vehicles become more in reach.
"If the scenario says the car drives itself, it's similar to sitting in an airplane seat because you're no longer actively driving," he said. "We see that as an evolution of the space that's quite interesting going forward that has infinite possibilities for us."
As an extension of that plan, Panasonic recently worked with Fiat Chrysler on its semi-autonomous Portal concept car shown off at CES in January. The concept featured electronics like an OLED touchscreen with facial and voice recognition.
Panasonic sees itself playing a role in fully autonomous cars as well by developing mobile offices or televisions specifically for self-driving cars, Gebhardt said.
Perhaps more notable is Panasonic's relationship with Telsa.
As one of the largest battery manufacturers in the world, competing with the likes of LG Chem and Samsung SDI, Panasonic had an easy entry into the electric vehicle space. The company plans to invest $1.6 billion in Tesla's Gigafactory.
"The future is definitely electric, no question in my mind, it's more of, 'what is the future timeline?' Is it 10 years, 15 years, 40 years?" Gebhardt said. "We don't see an alternative more interesting that, it's just a matter of what the adoption hits at the scale that makes this a slam dunk."
But, there are hurdles to overcome in both these spaces.
From the connected vehicle side, consumer adoption of infotainment systems is still lagging. J.D. Power led a 2016 study that found that more than 50% of car owners never used their in-vehicle displays after 90 days of purchase, preferring the ease of using their smartphones.
But the tech is still in its first-generation, Gebhardt said, adding adoption will improve with the technology.
Google's new Android display, for example, will integrate its smart voice assistant to encourage usage while driving.
"Any time you're dealing with a first generation product, a user is not going to be overly comfortable," he said.
As for electric cars, vehicle adoption in the US is still tepid, and global sales hover at 1%.
Gebhardt acknowledged adoption is slow in the US, particularly due to low gas prices - a trend that is likely to persist if Trump comes through on his promise to roll back fuel emissions standards. He said, however, that this is likely a "short-term problem."
While the US market is slow to progress, there's still hope when it comes to China, which is making a concerted effort to incentivize battery-powered vehicles.
China "being the largest car market in the world has a big influence on what will happen," Gebhardt said. "If they adopt in a big way, that changes the balance of where electric is today versus where it will be going."
Panasonic has made some heavy investments in nascent areas, but expects to see a return on investment soon. Tsuga recently said Panasonic is expecting an increase in net profit in fiscal year 2017, its first gain in two years, because of new bets on transit, Nikkei Asian Review reported.
"We're pretty bullish on the fact that this is a space that will continue to grow and there's value there," Gebhardt said.
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