The Hidden Message in Tesla's Battery Announcement

Did you catch it?

The implications for Tesla’s new battery technology are…in a word…immense. This week, to much fanfare, Tesla unveiled a technological road-map for the future of energy storage technology. In doing so, Tesla’s ultimate vision is coming clearer into focus, and it may be happening faster than originally thought.

As I noted before, for all the pomp and flash, the core of Tesla is its battery technology. Without continued improvements in this area, namely energy density and cost per kilowatt/hour (kwh), Tesla’s ability to expand and grow is limited. Tesla alluded to this fact during the presentation, which noted that battery cost improvements have started to plateau despite massive reductions in the companies earlier years.

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How Far We Have Come

The battery packs in the 2008 Tesla Roadster, used small-format laptop cells sourced from Panasonic, and are believed to have cost about $600–700/kwh. For Tesla’s next vehicles, the Model S and Model X, Tesla partnered with Panasonic to improve those battery cells, reducing the cost to about $200/kwh, while also increasing energy density, and introducing fast 1-hour charging capability at Tesla Superchargers.

The batteries in the Model 3 and Model Y went further, featuring a brand-new cell co-developed by Panasonic and Tesla. This slightly larger cell has a still higher energy density and 30% lower cost to manufacture, believed to be around $130/kwh. This newer battery also allows even faster charging rates, making electric vehicles a compelling, if a bit expensive, alternative to fossil-fueled vehicles.

Most experts agree that for electric vehicles to be truly competitive, dollar for dollar, with fossil fueled vehicles, we have to get the cost of the battery below $100/kwh. The battery road-map outlined by Tesla this week detailed precisely how to get there, and production of new generation cells has already started.

The new cells feature dry electrode technology, reducing the capital investment required to build battery factories. They also feature a larger form factor, which reduces the cost and weight of casings. Combined with a “tabless” design that improves battery efficiency and accelerates production capability, Tesla says they can bring the cost of energy storage down by an astonishing >50% from current levels. They didn’t provide a specific cost figure, but based on what we know right now, we can safety assume a cost of around <$80kwh is achievable.

At this price, which Tesla promises to realize in 2-3 years time, battery technology will have reached a point at which it will be at parity or cheaper than fossil fuels in most applications. Tesla will use this technology to make the Tesla Semi, Cybertruck, and as yet unnamed $25,000 car possible, pushing the envelope of EV technology and encroaching deeper into gasoline/diesel territory. If it wasn’t directly said during the presentation, Tesla’s message is clear: the fossil fuel era is coming to an end, and it is time for everyone to get on board.

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