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Tesla Motors Could Double Global Demand for Panasonic 18650 Lithium-Ion Cells

Tesla Motors Could Double Global Demand for the Panasonic 18650 Lithium-Ion Cell
Tesla Motors Could Double Global Demand for the Panasonic 18650 Lithium-Ion Cell

Tesla Motors started out small and, probably in a money-saving move, decided to use commodity Panasonic 18650 Lithium-ion [Li-ion] cells for its battery packs.

As we know, the economies of scale reduce costs the more production increases. That’s why it is so hard to make a profit on a short production run of practically anything. Big-time automakers, such as Toyota, General Motors, and Volkswagen, sell millions of vehicles per year, making small profits on each on, for big-time profits on the whole. In the case of electric vehicles, such as the Tesla Model S, Nissan Leaf, or the Chevy Volt, since they are produced in such small numbers, it is very difficult to make a profit on them. Fiat CEO Sergio Marchionne compared the Fiat 500e to financial masochism, and GM admits they lose thousands of dollars on each Volt they sell.

Somehow, Tesla Motors has managed to beat the odds and produce the Tesla Model S at a profit, and is now worth over $20 billion. Perhaps some of that success is due to making use of a relatively cheap Li-ion cell, the commodity Panasonic 18650, of which about 7,000 make it into each Tesla Model S 85kWh battery pack. Actually, Tesla Motors is the only electric vehicle manufacturer to make use of such a small cell [Nissan and Chevy Li-ion battery packs are made from fewer numbers of larger cells] and also produces the largest traction battery in any mass-produced passenger electric vehicle on the road today, meaning that Tesla Motors seems to be driving most of the demand for the Panasonic 18650 Li-ion Cell.

Some quick calculations shed light on an interesting phenomenon, in spite of the fact that, by volume, Tesla Motors is one of the smallest automakers in the world. For example, from December 2010 through July 2013, more than 71,000 Nissan Leaf, equipped with 24kWh Li-ion battery packs, have been sold around the world, a total capacity of 1.7 million kWh. If Tesla Motors sells 21,000 Tesla Model S about 30% with the 60kWh and 70% of the 85kWh Li-ion battery packs, that will amount to an equivalent capacity of 1.7 million kWh. Put simply, Tesla Motors has sucked up the same amount of Li-ion battery capacity as Nissan has, in one-third the time!

Now that Tesla Motors has gotten their production capacity up to better than 20,000 Tesla Model S per annum, they plan to increase production to 40,000 units with the introduction of the Tesla Model X. That’s an additional 1.7 million kWh capacity per year, whichshould do two things: Big profits for Panasonic and Tesla Motors, and perhaps a reduction in Tesla’s Li-ion battery pack pricing?

Image © Panasonic

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