Tesla Inc on Tuesday said that it is slashing battery costs to speed a global shift to renewable energy and could have a US$25,000 self-driving model available in about three years.
Tesla chief executive Elon Musk and the head of Tesla’s power team laid out battery design, material and production innovations that combine to cut the cost per kilowatt hour by 56 percent.
New approaches to making lithium-ion batteries for vehicles are desperately needed given the limited supply and cost, Musk said at a “Battery Day” presentation.
Tesla shares dropped about 6 percent in after-market trades as investors learned that the road ahead was not short.
Musk had put out word on Twitter that Battery Day announcements would be “insane,” driving high expectations.
During the presentation, Musk and Tesla energy engineering senior vice president Drew Baglino laid out technical details of the firm’s overhaul of making batteries, from raw materials and design to building finished cells into the structures of vehicles.
Innovations, some still in development, were expected to pack more energy into battery cells, cut production costs and dramatically extend battery life.
They expected it to be several years before transformative battery making methods were being used at scale in Tesla factories.
“It was not one big thing, but a lot of little enhancements,” iSeeCars.com executive analyst Karl Brauer said of Battery Day revelations, adding that they all add up to batteries that can be made faster and cheaper, and provide greater vehicle range.
Innovations include using plentiful silicon in batteries in place of more expensive material and designing battery cells themselves into the very structures of vehicles, Brauer said.
Musk and Baglino said that a shift away from fossil fuels toward sustainable energy is a vital part of tackling climate change.
“It’s really important that we take action,” Baglino said. “We’re going to run out of these fossil fuels, so let’s just move to the future.”
Making lithium-ion batteries cheaper and more abundant is essential to a global shift to renewable power, which is Tesla’s overarching goal, Musk said.
“We are going to work our darndest to transition the world to sustainable energy as soon as possible,” he said.
Along with making electric cars, Tesla has a battery division devoted to power cells for its vehicles, as well as storage packs for electricity at homes, businesses or disaster scenes.
Tesla makes batteries at its plants in the US and China, and is building a factory in Germany.
Lithium-ion batteries for Tesla models are made by Panasonic Corp at the electric vehicle company’s “gigafactory” in Nevada.
Musk on Monday wrote on Twitter that Tesla intends to increase battery purchases from Panasonic, LG Chem Ltd and China-based Contemporary Amperex Technology Co Ltd (CATL, 新能源科技).
“However, even with our cell suppliers going at maximum speed, we still foresee significant shortages in 2022 and beyond unless we also take action ourselves,” Musk said.
Tesla’s new method of battery making would potentially enable the company to field a US$25,000 model in “three years-ish,” he said.
Despite a long-stated goal of making electric cars for the masses, Tesla models start at a bit more than US$35,000 and quickly leap in price.
“It is absolutely critical that we make cars that people can actually afford,” Musk said.
However, Musk’s remarks cast uncertainty over the sales prospects of his suppliers in Asia.
Shares of LG Chem slid as much as 5.5 percent in Seoul, while CATL dropped 4.7 percent in Shenzhen and Panasonic dropped 4.3 percent in Tokyo.
Atul Goyal, an analyst at Jefferies Japan Ltd, lowered his rating on Panasonic to “underperform” from “hold,” saying that Musk’s announcements increase the downside risks for the Japanese electronics maker’s unprofitable battery business.
“This is likely to put Panasonic and other suppliers under pressure to catch up to Tesla’s technology/process and to reduce costs,” he wrote. “With added pressure to improve efficiency and/or reduce costs, Panasonic may need to step up more [research and development] and is unlikely to have pricing power, even if Tesla’s in-house cells are not ready to replace Panasonic cells in the immediate term.”
Additional reporting by Bloomberg
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