Slumping Tesla sales, uncertainty around auto tariffs and proposed cuts to electric vehicle incentives could have serious implications for the new $4 billion Panasonic factory in De Soto, Kansas.
The sprawling complex is being built to make batteries for electric vehicles — specifically Teslas and other brands. As the factory nears completion, industry observers are watching worrisome changes in the market.
“There is cause for concern,” said John Higham, vice president of communications and media outreach for the Electric Vehicle Association.
Kansas lawmakers approved $829 million in tax incentives to lure the plant to the Kansas City suburbs. When the deal was announced in 2023, Panasonic promised as many as 4,000 jobs with an average salary of $50,000.
But the contract the company ultimately signed with Kansas doesn’t have any job or pay requirements. A local incentive deal with De Soto did include hiring quotas, but they are much lower than the number of jobs originally touted.
Critics warned when the deal was signed that the company was not required to follow through on its initial hiring promises. Now, there’s growing concern Panasonic will tap the brakes on hiring amid economic uncertainty.
“Are (jobs) at risk?” Higham said. “The only possible answer that anyone can give you is, yeah, maybe.”
Projections of a slumping EV market
The Beacon spoke with multiple people who said short-term hiring could be at risk, but most added that the Panasonic plant should be secure for the long haul. The company has already made substantial investments and the plant will ramp up production over a period of years.
Even so, there are several signs the EV market may not meet expectations in the coming years.
Notably, first-quarter revenue at Tesla was down 9% and net income was down 71%.
“Uncertainty in the automotive and energy markets continues to increase as rapidly evolving trade policy adversely impacts the global supply chain and cost structure of Tesla and our peers,” the company said in an earnings presentation. “This dynamic, along with changing political sentiment, could have a meaningful impact on demand for our products in the near-term.”
The company’s reference to “changing political sentiment” was widely seen as an acknowledgement of the impact of Tesla CEO Elon Musk’s high-profile relationship with President Donald Trump, and a backlash from prospective customers who might otherwise buy the company’s vehicles.
Tesla sales dropped for the fifth straight month in Italy, Germany and Britain in May. In Britain, Tesla sales dropped 45% in May. Fewer U.S. customers are buying Teslas as well.
Tesla’s poor sales results come amid federal proposals that would discourage people from buying electric vehicles. Notably, Trump wants to eliminate the $7,500 tax credit that makes EVs cheaper.
A Harvard University study projects that future EV sales will fall if the tax credit goes away. Under existing law, EV sales could be 48% of new car sales by 2030. But that would drop to 42% of the market if the tax credit disappears. In the most extreme scenario, Harvard economists said EVs could plunge to 32% of new car sales by 2030.
There’s also federal legislation proposing to charge EV owners an additional $250 annually. Hybrid car owners would be charged an additional $100 annually.
That comes in addition to a pause on spending $3 billion to build new charging stations. Finally, there is ongoing uncertainty around tariffs — which can make batteries with foreign components more expensive to produce.
“It’s a … shame that the current administration has politicized it to the point that they’re ready to decimate this part of auto manufacturing … for political points,” Higham said.
Businesses rely on regulatory certainty to make plans, Higham said. Right now, he said fears of a recession and cuts at the federal level create uncertainty, “and businesses are going to respond to that with fear and trepidation.”
That means fewer capital investments and slower hiring, he said.
Joshua Jefferson, deputy secretary of business development with the Kansas Department of Commerce, said that Panasonic has diversified its battery offerings in response to the evolving market. The plant was initially touted as a Tesla and Toyota manufacturing plant. Now the company makes batteries for Lucid, Hexagon Purus and Harbinger Motors.
What can Kansas do?
The Kansas City Star reported in 2022 that the state’s contract with Panasonic didn’t include job and pay requirements. But Panasonic has things it needs to do to get more than $800 million in state-approved tax incentives:
- Spend $4 billion on the factory to get an estimated $500 million in incentives, by far the largest requirement for taxpayer dollars.
- Stay in Kansas for at least 15 years.
- Have an annual payroll of $234 million. It’ll then get $234 million in rebates over 10 years.
The Star reported in 2022 that Panasonic promised up to 4,000 jobs but refused to answer questions about an exact number of openings and pay. The De Soto City Council offered an estimated $229 million in tax-increment financing incentives if the company hired 2,500 full-time employees and invested $1 billion.
Panasonic has hired 660 people so far, Jefferson said. The company is planning a grand opening event on July 14, and Jefferson said the 660 figure is about right for a factory that hasn’t made a single battery.
Jefferson emphasized that these incentives are only given if Panasonic invests in Kansas and hires locally. He also noted that the incentives aren’t handed out in one big chunk. It’ll take years for every dollar to be awarded.
Jefferson said the investment is already paying off — De Soto was able to lower its taxes because of the additional sales tax brought in during the plant’s construction.
He stands by the contract the state signed.
“If we would have changed one thing in this package,” Jefferson said, “the deal would have gone somewhere else … These types of deals unfold in a very real, intentional way.”
Greg LeRoy, executive director of Good Jobs First, has been sounding the alarm for years about what he sees as a poorly written contract.
LeRoy said if he could, he’d go back in time and tell Kansas to make the agreement all about jobs. He wants Panasonic to only get the taxpayer dollars if they hired enough people with good benefits at full-time hours and local hiring preferences and apprenticeship training programs.
The contract does require an average salary at the plant, but averages are not the perfect measure.
“Performance-based incentives just make more sense,” LeRoy said. “They’re more precise, they’re more calibrated, they’re more politically feasible.”
Reasons for optimism
As for Tesla, Musk said the EV market will turn around.
“I encourage people to look beyond the bumps and potholes of the road immediately ahead of us,” Musk said to Axios. “Lift your gaze to the bright shining citadel on the hill — I don’t know, some Reaganesque imagery — and that’s where we’re headed.”
Panasonic, which is in line to receive billions of dollars in federal tax incentives by 2032, declined interview requests for this story.
A February presentation from the company said it is harder to make money on battery sales because the EV market growth is slow, but battery development remains a top priority.
Top Panasonic officials did answer questions about U.S. tariffs and the De Soto plant during a recent investor call.
Yuki Kusumi, CEO of Panasonic, said he expects difficulties manufacturing batteries using Chinese components in American factories, but there’s no major financial concern.
There’s been no significant slowdown in demand, Kusumi said. Panasonic estimates U.S. tariffs will cost the company’s energy segment $540 million, but that’s just 1% of group sales.
The company’s larger concern is a potential recession that will discourage buying electric vehicles. Panasonic’s investor presentation said sales will pick up because of more affordable vehicles.
The Toyota Corolla Hybrid and Prius are both on the more affordable end. But Teslas are not affordable for working-class Americans, said economist Chris Kuehl.
Kuehl said that a few things are working against Tesla sales and EV sales.
Owning a Tesla signals certain political opinions that can scare off some customers. There are also concerns about the range of EVs and ability to find charging stations.
But the Panasonic plant doesn’t have to tie itself to Tesla forever. Both Kuehl and Higham said the factory could pivot to make batteries for other cars, energy storage devices or something else.
State Rep. John Resman, an Olathe Republican, represents a district near the Panasonic plant. He said the plant will create a strong workforce in the long run. Panasonic is a multinational corporation that can attract other businesses to the area. That’ll help.
And projected EV sales may drop in the short term, but not forever.
“EVs are not going away,” Resman said. “Every day you read about companies that have expanded the amount of miles that batteries can take a car, and they can recharge even quicker now than they have in the past. So the technology is there.”
