The presentation of Tesla’s Battery Day on Tuesday was the most anticipated event of the year for many investors and Tesla supporters. Tesla CEO Elon Musk and Drew Baglino, the company’s powertrain and power engineering director, presented a comprehensive plan not only for the improved batteries, but also for the company’s next chapter.
In essence, the plan is to vertically integrate a large part of Tesla’s battery production, “from mining the ore to the complete battery pack,” as Musk put it. That control will allow for design and technological innovations that Musk says will dramatically lower the costs of Tesla cars. Tesla is currently working with partners like LG and Panasonic to produce batteries, and it apparently won’t be ending those relationships anytime soon. But it will dramatically expand its own battery production capacity and, executives said, will make those batteries for less than its partners today.
Based on its various innovations, Tesla projects it can cut the cost of its batteries by more than half in about three years (though Musk and Baglino didn’t reveal much about Tesla’s current production costs). The result, if Tesla’s projections come true, could fundamentally change the economics of car buying sooner than you think.
Better batteries
Tesla unveiled a number of innovations for battery assembly and chemistry at Tuesday’s event, some of which were already widely anticipated. Perhaps most importantly, a new “plate” battery construction method reduces battery heat by shortening the distance that energy travels during charging and discharging. That in turn allows for much larger battery cells; in fact, Tesla introduced an entirely new design called the 4680 cell, and said that the larger cells alone increased the vehicle’s range by 16%.
Faster factories
Musk repeatedly emphasized that developing new technologies is much easier than producing them at scale. The presentation included new details about Tesla’s pilot battery factory in Fremont, California, where the company says it has figured out how to produce batteries seven times faster than the current Gigafactory in Reno.
The key, according to Baglino, is to keep the production line in constant motion, just like in bottling plants. Another important factor contributing to efficiency is the “dry electrode” technique, which reduces production space and costs by 90% compared to the current “wet” method, which requires huge drying ovens. In total, Tesla says that within a year, its small pilot facility in Fremont will grow to produce 100 Gigawatt-hours of batteries a year, 2/3 of the roughly 150 GwH produced by the giant Nevada Gigafactory using current techniques.
However, production innovations don’t stop at drums. One of the most surprising and radical revelations of the night was the idea of a “structural battery”. It’s exactly what it sounds like: a battery built into the body of a car in a way that allows it to dampen stresses on the car’s frame.
Cheaper cars
All that efficiency points, Musk explained, toward the same grand goal that Tesla has pursued from the beginning: producing electric vehicles cheap enough to make gas-burning cars obsolete and, perhaps, save the planet.
With the cost reductions announced on Battery Day, Tesla says it has a clear path to producing an all-electric vehicle that costs around $ 25,000. Musk said Tesla will be able to start making that car in about three years.
That could mark a sea-change in car buying, because $ 25,000 is also the starting price in the US for two extremely popular gas-burning cars: the Honda Accord and Toyota Camry. But battery-powered cars are generally less expensive to power and maintain, which means buying an entry-level Tesla could be cheaper overall, which would make electric vehicles attractive to many more people.
So it remains to be seen if Musk can survive. Investors, for their part, weren’t impressed: Tesla shares fell nearly 7% in post-event trading.
That’s perhaps because investors were expecting major short-term new product announcements, but Tesla limited them to two relative footnotes. The new Model S “Plaid” sedan sports package, which goes from 0 to 60 in less than two seconds, will be available in late 2021. Musk also said the trial version of the Full Self Driving software, which would enable most Teslas driving themselves without human intervention, will launch in “about a month”. But the technology has supposedly been imminent for years, so we’ll have to wait and see that too.
