Is $25,000 Tesla possible?

 Why are electric car expensive comparing to same level gasoline cars? The answer is all in the batteries. Elon Musk is well aware of this and has big plans to evolute how EV batteries are made, in order to make $25,000 Tesla possible. 

 

The cost of EV battery is measured by dollar per kilowatt hour ($/kWh). With technology enhancement, $/kWh has been going down steady: from $1,183/kWh in 2010 to $156/kWh. However, now we have seen a plateau in batteries technology, and the rate of $/kWh cost decrease has dropped from ~20% year over year to ~10% year over year. While the majority of the people starts to accept that, Elon Mush doesn’t. He even used batteries as an example during one interview where he talked about practicing “first principle” – breaking things down to their most basic layer. The batteries are expensive, but he pointed out that the raw materials of batteries are mostly common metals that cost a tiny fraction (<1%) of the batteries price. All he needs is a better way to put the materials together, and that’s what he and his team at Tesla has shown us on this week – reducing $/kWh by 56%.

 

Here is Tesla’s plan on how to accomplish that goal:

Cell Design

As we all know, batteries have positive and negative tabs on the ends. Tesla’s new batteries cell design is tab-less. It is simpler to manufacture, fewer parts (no tabs) required, reducing the length of the path that electrical travels inside the cell up to 5x. The new design enable the battery cell to have 5x the energy, +16% in range and 6x the power than precious design. 

 

Cell Factory

Tesla will upward integrate and manufacture these new batteries themselves. Instead of relying on hundreds of component suppliers, bring the battery manufacturing in-house will save Tesla’s money and lead time. Without putting tabs on batteries, the production line will streamline the steps and create more cost saving. Tesla is panning on creating 100 GWh batteries in 2022 and 3 TWh by 2030. 

 

Anode Materials and Cathode Materials

Tesla has different plan of batteries content for different product in their portfolio. For example, iron based for basic line of vehicle (model 3 and model $25,000); Nickel and manganese based for long range vehicle (Model S, X, Y); and Nickel based for heavy duty vehicle (cyber truck and semi truck). Tesla will substitute one of the raw material – graphite using silicon, which is 20% cheaper and abundant on earth (28% of the earth’s curst). With new materials and process, Tesla can further eliminate a chemical process and achieve more saving and better environmental impact.

 

Cell Vehicle Integration

Lastly, Tesla team got inspiration from airplane: instead of putting fuel tank in wings, it is more space savings to put fuel directly into the wings. Tesla is planning on getting rid of the constructure that holds the batteries and integrate the batteries as part of the car’s body. It will require less part to build the car and safer in the event of side impact.

 

However, the investors don’t seem to be impressed by the new batteries and Tesla share has dropped that day. Elon Musk has always played the long term game and the new batteries are crucial to whatever he/Tesla will be accomplish in the next few years.