Tesla says halving battery production costs will make $25,000 car possible
Tesla Inc. will halve the cost of producing its electric-vehicle batteries while increasing their power and range, the Silicon Valley automaker said Tuesday during its highly anticipated "Battery Day" event.
With dozens of electrified vehicles from its competitors hitting the market in the coming months and years, Tesla is seeking to maintain its leadership in the segment with pioneering technology that may open electric vehicles up to a larger market and be more cost-effective. The innovations that Tesla could realize within three years, CEO Elon Musk said, could make a $25,000 electric-vehicle possible in three years.
"The fundamental good of Tesla will be looking back and saying, 'By how many years did we accelerate sustainable energy?'" Musk said during an outdoor presentation to a chorus of honking by guests sitting in their Teslas. "That’s the true metric of success."
Musk and Drew Baglino, senior vice president of powertrain and energy engineering, explained how the automaker will achieve a 56% reduction in dollars per kilowatt-hours through a bigger, simplified lithium-ion battery cell, integrating the battery into the vehicle's structure, altering raw materials used and reducing the steps it takes to manufacture the battery.
"Just getting the batteries so they are not taking an inordinate amount of the price of a vehicle is a challenge," said Sam Fiorani, vice president of global vehicle forecasting for AutoForecast Solutions. "If it's a $10,000 battery pack or more in some cases, it's very difficult to sell a $30,000 vehicle when the battery alone costs that much money. And when you have a $7,500 tax credit just to get the vehicle out the door — Tesla does not have that anymore. They have to compete with startups that do get those credits, so they're already at a $7,500 handicap."
Benefits from the innovations, however, won't begin to be realized for another year to 18 months, and some aspects of the plan are right now "close to working," Musk admitted. Shares were falling 7% in post-market trading.
Tesla also did not provide details on a "million-mile battery" that Musk has touted ahead of Tuesday's event. The innovations, however, do represent a 54% increase in range, according to the company.
"For a lot of applications, a battery that can last 300, 400, 500, 600,000 or a million miles is very important for things like robotaxis or commercial vehicles," Sam Abuelsamid, an e-mobility analyst with Guidehouse Insights, said ahead of Tesla's event. "A longer battery durability is important for cost."
But the technology Tesla shared in the presentation is "revolutionary" for batteries, Musk said, in the form of a new battery cell design. The cells are bigger and hold more power than the cells Tesla currently produces. Tesla immediately will produce the cells at a pilot plant in Palo Alto, California.
Additionally, the automaker says it has found a way to use silicon instead of graphite to store lithium that is cheaper and says it can eliminate cobalt from the structural cathodes by instead using nickel for long-range vehicles or a mix of nickel and manganese.
Tesla also will expand its Nevada plant where Panasonic builds battery cells to include production of the structural cathode part of the battery cell and to convert lithium for use in them. The company additionally acquired rights to a 10,000-acre lithium clay deposit in Nevada to extract lithium from ore using table salt and water.
"Eventually every company will have long-range electric cars," Musk said. "Not every company will be great at manufacturing them. We want to be head and shoulders above everyone in manufacturing. That is our goal."