TESLA’S BATTERY BUSINESS

This research provides insights into Tesla’s recently concluded “Battery Day”, the company’s battery business, and a competitive landscape with a focus on electric batteries. This spreadsheet has been populated with the details for 16 automotive companies.

TESLA’S “BATTERY DAY”

Meeting Setup and Overview

• The meeting scheduled for September 22, 2020, started 15 minutes late. This event was supposed to start at 4.30pm EST. This event had two major segments: The shareholder meeting and the “Battery Day” segment. Once the live transmission began, there were about a million times. 160,000 people watching. By 8.30pm, this video was watched over
• For those that attended the event physically, each person was assigned a Tesla car to follow the event proceedings, in order to adhere to the social distancing regulations. Each vehicle had a central screen where passengers could follow the event and a custom program. As stated in the previous research, participants would honk their cars to show support/respond to the presentation. This was an ingenious product-placement move by Tesla.

Environmental Impact

• Tesla is also keen in ensuring that it reduces its impact on the environment. During this event, Tesla addressed the changes that the company will make to address the production of EV batteries. Traditional methods result in the production of excess waste or solvent. Addressing these issues is expensive and an energy-intensive process. 
• In his statement, Musk said the following: “We are a proud mining nation. Let’s continue that legacy by supplying environmentally-sustainable, ethically-sourced, high-quality battery minerals to the world, in addition to the value-added products that can be locally manufactured with these resources.”

Model S Plaid

• In his announcement, Musk said that the Model S Plaid was now available on the company’s website and anyone interested could configure and place an order, with deliveries scheduled to begin towards the end of 2021. It is no doubt that this long awaited announcement would be the focal point, accompanied with its impressive specs. In his announcement, Musk was keen to elaborate on them: “a range of over 520 miles, a top speed of 200-plus mph, a 0-to-60-mph time of under 2 seconds, and a quarter-mile time of less than nine seconds.“
• This vehicle has a price tag that could be steep for many: $139,990. 

Battery Design

• Tesla’s new battery cell is referred to as the “biscuit tin”. This battery is cylindrical in design and uses lithium-ion chemistry. The larger cell canister has had the most significant change. This change increases the car’s range by 16% and a 5X increase in energy.
• Tesla aims to produce its own EV batteries. The new “tabless” design will reduce the cost of production, which will bring down the overall cost of EVs.

Impact on Tesla’s Stock

• Following Tesla’s “Battery Day,” the company experienced a drop in its stock. Although this is a tech-wide trend, it was evident that it generally disappointed investors. Following the Tuesday event, on Wednesday, stocks had dropped by more than 10 points.  
• Musk’s attempt to manage expectations for the event resulted in a five-point drop in its stock. On Monday, he posted on Twitter stating that “the battery announcement would affect long-term production of Tesla’s vehicles.”
• It is speculated that the weak response to the announcements on “Battery Day” could be because Musk had already hinted the possibility of a $25,000 EV in 2018. This resulted in a $50 billion chop off its stock value, which continued to decline into the next day.

Cobalt Will Be Phased Out

• Using cobalt in EV batteries has always had its challenges. It is a rare mineral that is difficult to mine. As a result, it is often done in an unethical way. For these reasons, Tesla has been looking for ways to eliminate this component.
• Although Tesla uses significantly less cobalt than most companies in this industry, it may not be able to eliminate it completely. However, the company is taking steps toward phasing them out as it will also impact the cost of production.

New Manufacturing Plant

• A new cathode plant in North America is also in the pipeline. Although the company is not sure which state it will be in, Musk says that the aim is to build a Gigafactory in every continent. This plant will utilize resources found in North America. By localizing this part of the production process, the company will have reduced the distance traveled by the battery components by 80%. 

TESLA’S BATTERY BUSINESS

Overview

• Tesla’s stock price is trading 10 times more in 2020, in comparison to 2019, with its shares surging over the $2,000 mark. The primary contributor to this stock price, aside from the overall investor excitement, is its battery business.

• This company’s lithium-ion battery cells are manufactured in partnership with Panasonic. This collaboration at the Gigafactory in Nevada since 2014 was a three-year deal. Panasonic would meet a specific capacity and Tesla would purchase this volume.
• Currently, Tesla is developing new battery production facilities in Fremont, California and in Germany.
• The Gigafactory has been Tesla’s attempt at expanding global production of batteries to reduce the overall cost of EVs. As it stands, the agreement with Panasonic should continue until 2023. Even though Tesla is looking for ways to produce its own batteries, it does not plan to reduce its purchase volume from partners such as Panasonic, LG, and CATL. Even though all these efforts work at their optimum level, Tesla still predicts that there may be an EV battery shortage from 2022.
• Tesla prominently ventured into the electric batteries market in 2015. During the Tesla Energy announcement, the company debuted its “electric home battery and an electric grid battery solution.” Tesla’s partnership with Panasonic ensures that its Gigafactory produces all these batteries.

Tesla Energy Batteries

• Tesla Energy, now called Energy Generation and Storage, was launched in 2015. The company was expanding its capabilities by venturing into a new segment. Products here included the home battery and the grid battery.
• This segment brought in $1.5 billion in 2019: 6% of Tesla’s total revenue, while the automotive segment brought in 85%.

Tesla’s Car Batteries

• Its solar battery manufacturing business empowered Tesla to produce electric batteries and gained leverage to venture into making its own EV batteries.

Tesla’s Powerwall

• Launched in 2015, this home battery system now costs $14,100 with installation fees ranging between $2,000 and $8,000. A typical setup consists of two batteries and the hardware that supports it. This system is typically paired with a solar panel. One could opt for the solar-plus-storage system, which could shift the cost based on the equipment used and the location.
• These Powerwalls can also be used to charge an EV. Despite the high cost, this could easily become a worthwhile investment.

Tesla’s Powerpack

• This is a grid battery that supports more than just one home. This is ideal when one wants to take an entire connected system off the grid. This system is primarily famous for its backup capabilities. Here are examples of some facilities/locations that use this technology: A luxury lodge in South Africa, a resort in Fiji, at Southern California Edison, and the Hawaiian island of Kaua’i.

Competitive Landscape

•  This spreadsheet has been populated with insights surrounding EV battery production/usage in comparison with other car companies. This is a comparison between each company and Tesla. It is clear that most automotive companies do not produce/manufacture their own batteries: Most are outsourced from companies in China.
• The chart below presents the revenue of the top car companies in the world.