WEBVTT - Megan Myungwon Lee Talks Panasonic North America's New EV Battery Plant

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>This is a four point seven million square feet facility

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<v Speaker 2>that at full capacity thirty gig or what hours, enough

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<v Speaker 2>for five hundred thousand evs, but animal powered by these

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<v Speaker 2>little guys twenty one to seventy cells. And we're delighted

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<v Speaker 2>to be joined by Panasonic Corporation of North America CEO

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<v Speaker 2>Megan meong on Lee, regular contributor to the show. But

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<v Speaker 2>this was the moment you and I talked about it

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<v Speaker 2>earlier in the year. What does it mean for Panasonic

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<v Speaker 2>in America and American manufacturing of battery technology?

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<v Speaker 3>So this is more than a ten year vision. We

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<v Speaker 3>wanted to do this and we wanted to go big

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<v Speaker 3>in this market. So we had a commitment and we

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<v Speaker 3>started in Reno and Nevada and this is our factory

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<v Speaker 3>that we're diversifying our EV strategy and we're going to

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<v Speaker 3>be full production this year and it's really exciting. Today's

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<v Speaker 3>a fun and exciting day, and this is a celebration.

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<v Speaker 2>Full production this year, so sales are already coming off

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<v Speaker 2>the line. Could you just explain the roadmap for the ramp,

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<v Speaker 2>because no facility is straightforward, but this is the size

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<v Speaker 2>of two hundred American football fields. How are you going

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<v Speaker 2>to get to full capacity this year?

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<v Speaker 3>So we started in November twenty twenty two, two and

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<v Speaker 3>a half years ago, and it was all flat field

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<v Speaker 3>and it was a massive land and we started the

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<v Speaker 3>construction and we started the production and testing last week.

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<v Speaker 3>And we're going to produce the batteries this year. And

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<v Speaker 3>you probably saw the cars that we have in Display

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<v Speaker 3>and Tesla, Lusid and Hexagon truck and we're really excited

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<v Speaker 3>to work with different suppliers and partners and clients this year.

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<v Speaker 2>We're going to discuss in detail those customers. They're really

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<v Speaker 2>key to this. There were media reports Friday night that

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<v Speaker 2>there would be a delay in reaching full capacity and

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<v Speaker 2>what the report stated was that was due to demand.

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<v Speaker 2>Are you able to comment on that report? And it

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<v Speaker 2>sounds like they were misinformed. If you are going to

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<v Speaker 2>hit full capacity this year, I.

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<v Speaker 3>Do think it was misinformed and very We're a Japanese

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<v Speaker 3>company and when we say when we commit to something,

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<v Speaker 3>we're fully committed and we want to make sure that

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<v Speaker 3>we support all the customers that were committed. We're not

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<v Speaker 3>feeling the slow down yet and we're very bullish on

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<v Speaker 3>working with all those customers.

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<v Speaker 2>When you say you're not feeling the slow down, that

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<v Speaker 2>means that you're seeing consistent orders from those key customers

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<v Speaker 2>or they're still committing to orders in advance.

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<v Speaker 1>What do you mean by the definition of what you

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<v Speaker 1>just said.

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<v Speaker 3>So we have the operation in Reno and that's going

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<v Speaker 3>very healthy, and we're seeing the commitments coming in for

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<v Speaker 3>this facility as well. So we're not feeling the slow

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<v Speaker 3>down yet. But yet again, I mean, you see this operation,

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<v Speaker 3>this is a long term commitment, so there are may

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<v Speaker 3>be some pushback or moving ahead, or we're committed for

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<v Speaker 3>a long term and we're not shying away from those

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<v Speaker 3>from time to time challenges.

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<v Speaker 2>Throughout the morning, there was a lot of discussion about

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<v Speaker 2>Tesla because Tesla makes the best selling ev model in

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<v Speaker 2>the world this specific facility, does Tesla dominate the proportion

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<v Speaker 2>of output or is it more evenly split across your

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<v Speaker 2>different customers.

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<v Speaker 3>So we're working with Tesla for sure, and we're working

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<v Speaker 3>with Lucid and Hexagon and other clients. So it is

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<v Speaker 3>to diversify our EVN manufacturing in the United States.

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<v Speaker 2>What do you mean by diversify move away from one

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<v Speaker 2>sort of core customer.

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<v Speaker 3>No, not really. We're expanding right so we're definitely working

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<v Speaker 3>with Tesla, but we want to work with other establish

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<v Speaker 3>the OEMs as well as startups. So it's part of

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<v Speaker 3>our efforts to expand our strategy and manufacturing output as well.

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<v Speaker 2>What signals has Tesla given you about its future orders,

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<v Speaker 2>about the health of its business.

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<v Speaker 3>Your guess is as good as mine. But we have

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<v Speaker 3>a long term relationship, longer than anyone else, and there's

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<v Speaker 3>still a very important strategic partner for us, and I

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<v Speaker 3>believe our partnership is very strong.

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<v Speaker 2>Throughout the morning, there was a lot of discussion of

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<v Speaker 2>how Kansas was the absolute best candidate. What were the

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<v Speaker 2>biggest factors in choosing this site? Were they financial? Were

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<v Speaker 2>they simply the ability to get things done? Lack of

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<v Speaker 2>red tape? Why were you able to move so quickly?

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<v Speaker 3>So we talked about the available workforce and the infrastructure.

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<v Speaker 3>I mean you saw the power lines built by the

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<v Speaker 3>factory and as well as the energy procurement that we

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<v Speaker 3>can do. But more than anything, there was something very

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<v Speaker 3>special about Kansas. All the officials were able to work

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<v Speaker 3>with us, and you probably heard that Lautana Governor Toland

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<v Speaker 3>taking some of his speech in not only Japanese but

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<v Speaker 3>Osaka dialect, and that level of insights and care and

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<v Speaker 3>support really made the difference. And it doesn't matter what

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<v Speaker 3>party they are, they're very committed to bring us here

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<v Speaker 3>but also make us feel home. So that kind of partnership,

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<v Speaker 3>not just numbers and infrastructure, but emotional partnership made the

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<v Speaker 3>difference and we're so happy to celebrate today.

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<v Speaker 2>What I was going to say on the numbers is

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<v Speaker 2>there is a job creation story. It's four thousand direct jobs.

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<v Speaker 2>I think the number is twenty thousand indirect jobs. When

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<v Speaker 2>you take into account supply chain construction, what have you

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<v Speaker 2>had to do to kind of bring the other infrastructure

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<v Speaker 2>you've needed to de Soto have everything you need around you?

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<v Speaker 3>So what was great about planning it out? Like I said,

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<v Speaker 3>we started two and a half years ago, and at

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<v Speaker 3>that time we worked with local schools and community colleges

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<v Speaker 3>to create curriculums so when missed for manufacturing, they are

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<v Speaker 3>there already already taking the courses and be available to

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<v Speaker 3>take a job.

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<v Speaker 1>To guarantee you had the skill sets.

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<v Speaker 3>Absolutely absolutely, So we created curriculum together and it's been

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<v Speaker 3>a really good partnership and it helps us and it

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<v Speaker 3>helps the community and it's like wonderful win win.

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<v Speaker 2>The headline figure was that Panasonic put four billion dollars

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<v Speaker 2>into this foot to Sodo facility. But you also the

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<v Speaker 2>reported number is eligible for almost seven billion dollars from

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<v Speaker 2>the Inflation Reduction Act.

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<v Speaker 1>How much of that materialized.

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<v Speaker 3>We haven't started the manufacturing here, so we have not

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<v Speaker 3>seen the incentives yet.

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<v Speaker 1>They're setting against milestones.

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<v Speaker 3>Yes, yes, so it comes with the production. So we're

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<v Speaker 3>looking forward to it and it's definitely a big part

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<v Speaker 3>of our investment.

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<v Speaker 2>Do you anticipate that you will get access to the

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<v Speaker 2>full tranche of money?

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<v Speaker 3>We certainly hope.

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<v Speaker 2>So things have changed, I mean things have changed even

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<v Speaker 2>since you and I spoke in January.

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<v Speaker 1>There is some.

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<v Speaker 2>Effort underway to reshape or or undo the Inflation Reduction Act.

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<v Speaker 1>It seems like the seventy five.

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<v Speaker 2>Hundred dollars credit which goes to the consumer on the vehicle,

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<v Speaker 2>will go, but the forty five x manufacturer credits seems intact.

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<v Speaker 1>How have you navigated that? Is that you'll read on

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<v Speaker 1>the scenario as well.

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<v Speaker 3>So we're very still a vehicle fall that should remain

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<v Speaker 3>and I think it should remain it's not only for us,

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<v Speaker 3>but it's for creating jobs and manufacturing and bringing technology

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<v Speaker 3>to us. So so far it's very positive and we're

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<v Speaker 3>hopeful that its stay is it will be a big

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<v Speaker 3>part of our long term strategy.

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<v Speaker 2>What's the supply chain story right now for DeSoto, Kansas?

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<v Speaker 2>When you think about your raw material needs and everything

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<v Speaker 2>that goes into the cell process, are there things that

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<v Speaker 2>are still difficult?

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<v Speaker 1>What are they?

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<v Speaker 2>Or has bringing this facility online been smoother because of policy?

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<v Speaker 3>We have been planning for the supply chain resilience, not

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<v Speaker 3>just for this and recent terrificuation, but from COVID. During COVID,

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<v Speaker 3>we really suffered from weak supply chain. I mean, I

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<v Speaker 3>think all the industry did, and so did we. So

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<v Speaker 3>we've been planning for supply chain resilience and we are

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<v Speaker 3>I mean just for our benefit too, to make sure

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<v Speaker 3>that those supply chains stay local and within the North America.

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<v Speaker 3>And our goal is to complete fifty percent of our

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<v Speaker 3>supply chain by twenty thirty to be completely local.

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<v Speaker 2>Are any of the conditions currently associated with that forty

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<v Speaker 2>five x manufacturer credit difficult? When you think about foreign

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<v Speaker 2>entity of concern or parts of the supply chain, which

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<v Speaker 2>in the context of metals like China, is still a factor.

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<v Speaker 3>Yes, yes, yes, so we started partnering with China and

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<v Speaker 3>we are for the supply chain resilience. We are trying

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<v Speaker 3>to diversify and make sure that supply chain is more

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<v Speaker 3>Zulians to make sure that we can procure and process

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<v Speaker 3>on site. So it's not really a new change for

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<v Speaker 3>us necessarily, We've been trying to do that for a

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<v Speaker 3>few years.

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<v Speaker 1>Where are the bottlenecks right now? If any, I don't know.

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<v Speaker 3>It's really the refining process, to make sure that we

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<v Speaker 3>can find a supplier who can make sure that quality

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<v Speaker 3>is there. Right the refinement, the quality matters for our

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<v Speaker 3>quality production. So that's where we pay most attention to

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<v Speaker 3>make sure that the raw material is ready for EVY batteries. Right,

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<v Speaker 3>it's good for everyone, for consumers. We want to make

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<v Speaker 3>sure those av batteries are tested and safe.

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<v Speaker 2>I know this might seem far fetched. We're just bringing

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<v Speaker 2>this facility online. Yes, but one of the questions I

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<v Speaker 2>got from you from the audience is what happens next

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<v Speaker 2>you have the Vada you now have Kansas. Does Panasonic

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<v Speaker 2>see further site for ev in the first instance, what

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<v Speaker 2>is your next priority.

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<v Speaker 3>It's TBD. Today's the first day of this operation and

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<v Speaker 3>we're really excited to make sure that this goes smooth,

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<v Speaker 3>producing quality EV batteries. We'll focus on their first and

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<v Speaker 3>if it goes well, who knows right?

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<v Speaker 1>Demand is still a question.

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<v Speaker 3>Yes.

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<v Speaker 2>What I find interesting is a lot of the customer

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<v Speaker 2>basis pure play EV. But the lesson we've learned in

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<v Speaker 2>the last eighteen months or so is hybrid is still

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<v Speaker 2>a big part of the market, maybe in a way

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<v Speaker 2>that surprised many. Do you have the ability to tap

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<v Speaker 2>into demand for hybrid from this facility or others.

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<v Speaker 3>We don't know yet, but we're pleasantly surprised that eb

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<v Speaker 3>sales still rows by like eleven point four percent, So

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<v Speaker 3>that's a good sign. And like I said, this is

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<v Speaker 3>a long term play, so we're not going to be

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<v Speaker 3>happy and said with the small ups and downs, we're

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<v Speaker 3>still bullish that ebie markets should grow and hybrid transition

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<v Speaker 3>should be part of it.

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<v Speaker 2>Have you done a sort of side by side analysis

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<v Speaker 2>of the economics of a single cell?

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<v Speaker 1>Bring mine back out. I have one single twenty one.

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<v Speaker 2>Seventy cell here, so this will be manufactured in Kansas,

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<v Speaker 2>not subject to tariffs. You have the Nevada facility, but

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<v Speaker 2>Panasonic Energy also has facilities all around the world. Is

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<v Speaker 2>it just an instant fixed that the cell on a

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<v Speaker 2>unit basis is just a more attractive economic proposition if

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<v Speaker 2>it's built here in Kansas for the American market versus

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<v Speaker 2>shipping cells in from EU overseas facilities.

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<v Speaker 3>It makes a lot more economic sense to produce here, right,

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<v Speaker 3>Bring raw materials here and produce here.