Key Takeaways From Much-Awaited Tesla Battery Day Event

Zacks Equity Research
·7-min read

Tesla’s TSLA astronomical share price gain has been one of the most successful stories of the stock market in 2020. Shares of the red-hot EV maker have skyrocketed more than 400% year to date, with its market cap surpassing the combined value of major auto biggies including Toyota TM, Volkswagen VWAGY, General Motors, Ford and Fiat Chrysler. Amid rising climate concerns, investors are intrigued by automakers that look for solutions to lower global carbon emissions for providing a cleaner energy future. Tesla leads the race in this regard. While competition is heating up in the electric vehicle (EV) space, Tesla knows for a fact it has to carry out continuous innovation to maintain the competitive advantage.

Spotlight on Tesla Battery Day

The firm’s highly-anticipated battery summit was live streamed yesterday. Well, the stock lost 5.6% ahead of the flashy event as its CEO Elon Musk’s tweets might have dampened the sky-high expectations of investors. Musk took to Twitter to clarify that the technological innovations and ambitious battery designs won’t make it to production for another couple of years. He tweeted: “Important note about Tesla Battery Day unveil tomorrow. This affects long-term production, especially Semi, Cybertruck & Roadster, but what we announce will not reach serious high-volume production until 2022”. 

Nonetheless, Tesla — which currently carries a Zacks Rank #3 (Hold) — made some big announcements during the event as the company aims to become the world’s largest automaker in the coming years. Musk announced a series of vertical integration improvements, gave updates on its battery technology and pricing of future cars, and a lot more. He laid down the road map to halve the cost per kilowatt-hour, a key metric affecting the final cost of an EV. You can see the complete list of today’s Zacks #1 Rank stocks here.

Here’s a rundown of the major announcements that you should be aware of.

Tabless Battery Design to Step Up EV Revolution

Tesla unveiled plans to manufacture its own tabless batteries, which are expected to boost the range and power of EVs. By developing the batteries in-house, Musk expects the costs to reduce drastically, which will eventually enable the company’s EVs to reach price parity with internal combustion vehicles. Importantly, the tabless cells (formed by removing the tab, part of the battery that creates a connection between the cell and what it is powering) — being touted as ‘Tesla 4680 battery cell’ — is anticipated to enhance the range by 16%. The firm claims that these tabless cells will boost the batteries’ energy capacity by five times and make them six times more powerful.

While most automakers have misgivings about developing their own batteries owing to high investment costs and lack of expertise, manufacturing its own batteries had been in Tesla’s bucket list for quite some time now. While the company will continue to source batteries from its major supplier Panasonic PCRFY and others including CATL and LG Chem, it’s taking the electrification game a notch higher by deciding to produce its own batteries. In fact, Tesla expects supply shortage of cells by 2022 and beyond, unless it ramps up output.

Tera is the New Giga

Tesla’s ultimate aim is to achieve “Terawatt-hour” (TWh) scale battery production with improved battery cell designs and simplified manufacturing processes. The firm targets 100 gigawatt-hours worth of annual production capacity by 2022 and a whopping 3 TWh of capacity by 2030.Musk estimated that 10 TWh of capacity would be needed to convert all global vehicle production to EVs.

Cathode Plant & Cobalt-Free Battery in the Making

In a bid to lower supply chain costs, Tesla plans to build its own cathode plant and a lithium conversion facility in North America. The company is making significant improvements in the process of making the cathodes 76% cheaper and producing zero waste water. Tesla intends to use raw silicon to develop battery anodes, which are expected to boost vehicle range by 20% and reduce battery production costs by 5%.

More importantly, it aims to eliminate the usage of cobalt in battery cells.As Cobalt is expensive and the supply chain is challenging, the company intends to avoid cobalt, and increase nickel content and include manganese instead. The EV maker is developing high-nickel battery cathodes that require no cobalt, which will cut down costs by 12% and increase the range by 4%.

Model S ‘Plaid’ Open for Orders, Deliveries in 2021

Musk revealed that the “Plaid” version of the Model S sedan — boasting jaw-dropping range and performance specifications — is finally available to order, though the deliveries of the same are not expected until late 2021. Priced at $139,990, the 1100-HP Model S Plaid has a range of 520 miles on a single recharge. Tesla’s charismatic and overzealous CEO has been teasing the Plaid powertrain for quite some time. Last September, Musk tweeted that “the only thing beyond Ludicrous is Plaid’. Notably, the Plaid powertrain can achieve a top speed of 200 miles per hour (mph) and accelerate from 0 to 60 mph in under two seconds. One can avail the preorder for the 1100-HP Model S Plaid from the company’s website with a refundable deposit of $1,000.

20 Million Annual Production Target Down the Road

Tesla is eventually targeting the production of 20 million vehicles a year, almost double of what Germany-based Volkswagen sold last year as the world’s best-selling individual auto company. Musk also reaffirmed Tesla’s bullish deliveries forecast despite coronavirus woes. For 2020, he expects deliveries to increase 30-40% from 2019 levels of 367,500 units. This would translate to deliveries of 477,750-514,500 units this year. Initially, the company had targeted deliveries of 500,000 units.

A $25,000 EV in the Cards

As the company remains focused on reducing battery cost, Musk has promised a $25,000 worth electric car, making it the most affordable vehicle that Tesla would have ever manufactured. Yes, you heard it right! The firm intends to achieve this feat by lowering battery costs by 50% through deploying the new tabless battery cells and modifying the battery composition. Moreover, Musk also promised the low-cost EV — which is likely to be available in the market in three years — to be fully autonomous.

Nonetheless, one cannot overlook the fact that Tesla has a history of over promising and under delivering at times. However, things have started to look up gradually. In fact, 2019 was arguably the first year the company finally met its lofty goals. Tesla surprised investors by hitting delivery targets last year. Musk also managed to keep up his promises related to the Shanghai Gigafactory progress. As the company seems to be leaving no stone unturned to meet the CEO’s ambitious goals, we keep our fingers crossed for the compelling $25,000 EV.

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