Fremont, California — On Tuesday, Sept. 22 Elon Musk, CEO of Tesla, announced a new battery system that will enable him to launch a $25 000 electric vehicle.
At the much-anticipated battery day event, Musk said this new battery system–the “million-mile battery,” which won’t be in serious high production until 2022, will be produced in-house by Tesla with the use of larger cylindrical cells.
“We need to make affordable cars,” said Musk. “One of the things that troubles me the most is that we don’t have a truly affordable car, and that’s something we will have in the future. For that, we need cheaper batteries.”
The “million-dollar battery,” is not meant to run one million miles between recharges, the idea is to design batteries that can be swapped in and out to help with long hauls.
Following the announcement, the three top EV battery companies fell roughly five percent by the close of trading in the U.S on Tuesday.
“This is likely to put Panasonic (and other suppliers) under pressure to catch up to Tesla’s technology/ process and to rescue costs,” said Atul Goyal, an analyst at Jefferies Japan, who lowered his rating on Panasonic to underperform from hold, due to Musk’s announcements.
“With added pressure to improve efficiency and/or reduce costs, Panasonic may need to step up more R&D and is unlucky to have pricing power, even if Tesla’s inhouse cells are not ready to replace Panasonic cells in the immediate term,” said Goyal.
Yayoi Watanabe, spokeswoman for Panasonic declined to comment on Musk’s announcement but instead said the company values its relationship with Tesla and looks forward to enhancing the partnership.”
According to Musk, the new design of batteries is going to make them cheaper to produce. The new battery system will offer five times more energy and six times the power of the current battery pack used in the Model 3 and Model Y.
However, Musk stated they will still continue to buy battery parts from outside companies to meet its demand. Tesla has a goal of building 20 million cars per year compared to its current hundred of thousands.
“Today, [electric vehicles] account for about three percent of the cars sold globally,” according to Gene Munster, an investor and managing partner of Loup Ventures, who wrote in an analysis for the event. “Tesla has an opportunity to parlay it’s current 80 percent [electric vehicles] market share in the US, along with about 20 percent in Europe and Asia, into a massive business in the years to come. To be successful, the company needs to ramp up its production of batteries.”
The battery plan will cut production in half while improving the range of Tesla’s global market. By producing their own batteries, it will be able to integrate them more effectively into the structure of future cars and pack them in more densely.
Musk believes producing its own battery is essential in achieving the cost savings needed to produce an “affordable” car. However, Tesla will continue to buy batteries from suppliers including Panasonic, CATL and LG Chem, to meet its demands.
Tesla also announced they will start pilot production of the new battery at it’s factory in Fremont, California, however, it will take at least one year to reach full production capacity, said Musk.
At Tuesday’s event, Tesla’s Fremont manufacturing facility had rows of Tesla cars filled with shareholders lined up in a parking lot to hear his announcement.
“We’ve got the Tesla drive-in movie theatre, basically,” joked Musk.
