Even though Tesla’s “Battery Day” was held Sept. 22, 2020, it didn’t produce the wildly exciting results that Elon Musk had promised would “blow your mind.”
During its event, Tesla unveiled plans to develop a “million mile” battery that could last an electric car’s entire lifetime on the road. It also outlined plans to dramatically reduce the cost of its battery cells and packs to $100 per kilowatt-hour, at which point experts believe electric cars will become comparable in price to combustion engine vehicles.
Bill Gates-backed QuantumScape, the first US battery company to go public in a decade, announced that it has overcome two major hurdles to create an all-metal lithium battery, which, if true, would allow electric vehicles to go up to 50% further on a single charge. Those hurdles were metallic lithium’s propensity to explode when it comes into contact with liquid and its needle structure that has historically punctured plastic separators between electrodes and caused shorts.
They announced that VW would being using those batteries in their vehicles in 2025. At the same time that the startup he backs was announcing a significant technological coup over Tesla, Gates was writing a blog post to cast doubt on the ability of batteries to serve as practical solutions for long-haul trucks and cargo ships, an area that Tesla has more recently moved into and does not have the same enormous lead it does in the electric passenger car space.
Though its share price has rallied somewhat in the past few days, investors in September were selling off shares of Tesla, leading to a 21% drop in the first week in September, indicating that even with a big announcement on the way, there is a bear market for technology stocks generally, and alternative power stocks specifically. That was only exacerbated by impressions that Tesla’s stock in particular is significantly overvalued.
But Tesla seems poised to turn the narrative around with an anticipated announcement this month that the car-and-battery manufacturer is about to achieve price parity with combustion-engine vehicles. Tesla has been in the market long enough to steadily take advantage of the 7-8% increase in battery efficiency every year, such that the average battery pack was about $130 kWh compared to the $100 kWh cost of combustion-engine vehicles.
In the last year, design improvements have been less important than logistical and manufacturing efficiencies, achieved primarily through targeted acquisitions. The first of those acquisitions was Maxwell, a San Diego company that had designed a battery manufacturing process that could reduce the space needed for equipment and increase energy density. The other was a Canadian company called Hibar, which had created an automated system for battery manufacturing.
Vertical integration has also played a role in Tesla’s quest for cost-parity. Tesla originally sourced all its batteries from Panasonic, before demand forced them to source from LG and CATL, China’s largest lithium-ion battery producer. While Tesla has built an $80 kWh battery pack with CATL, it has a range more suitable for China’s urban markets than for the US’ sprawling freeway system. Now, Tesla plans on producing their batteries themselves in “terafactories,” plants that can produce batteries on 20 times the scale of his current gigafactory and using the technologies of Maxwell and Hibar to produce higher-density batteries without significantly increasing the footprint of the factories themselves.
In my other article this month, I talk about how Generac is driven by innovation, which has allowed it to capitalize on the pandemic and severe weather of 2020 in a significant way. It also has set itself up to make competing backup power systems obsolete. Their endless pursuit of innovation has made them into a market leader that still manages to grow their market share through consumer-focused products.
Tesla is captivated by the very specific and powerful vision of Elon Musk, who “wants you to think of the internal combustion engine like an expensive horse,” in the words of Venkat Viswanathan, a professor at Carnegie Mellon. Musk’s goal through Tesla is to make the internal combustion engine obsolete. He is not looking for consumers to be simply indifferent between batteries and IC-engines, but for IC-engines to have a social stigma. It isn’t clear that the traditional automakers include a constant and radical innovator who can compete with Tesla from the traditional engine side or catch up to them on the battery side.
Passenger Cars are only one of the 13 segments that we track at Power Systems Research, but one thing that everybody with a hand in that industry, or in Lawn & Garden or Recreational Products or Commercial Vehicles knows is that the technology that comes to passenger cars does not stay there.
Improvements to both batteries and to the process of manufacturing them are a major focus of our team of analysts, because we know that businesses in all of the engine-powered industries, including our own, are set to face an unprecedented upheaval when batteries or other alternative power sources achieve cost-parity with international combustion engines.
PSR has experience forecasting these upheavals in custom projects and our global-coverage databases are updated quarterly to reflect our best understanding of the emerging alternative power markets. Take advantage of our expertise, and make sure your business doesn’t become another Kodak in this once-in-a-generation transition. PSR
Tyler Wiegert is Project Manager and Analyst at Power Systems Research
