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Will Tesla Motors Have to Build Its Own Lithium-Ion Battery Plant?

Tesla Model S, Just a Small Part of the Overall Tesla Motors Plan
Tesla Model S, Just a Small Part of the Overall Tesla Motors Plan

The Tesla Roadster and Tesla Model S have always been part of a much bigger Tesla Motors plan, one that has seemingly been executed flawlessly.

The idea was simple: Start with a high-price low-volume electric vehicle to build interest in the product and fast profits. Then, pour those profits back into the company, along with a generous helping of personal funds, and work towards a mass-market high-volume low-profits vehicle. From statements by Elon Musk, CEO of Tesla Motors, as well as financial statements and stock prices, it seems that the company is well on track to meeting those goals. Right now, Tesla Motors has topped 20,000 Tesla Model S per year, but the future is going to get pretty heavy.

Rumors and statements point to the Tesla Model X being produced soon, but the biggest news has got to be the upcoming mass-market vehicle, possibly the Tesla Model E. The new Tesla Motors model, which could sell for around $35,000, is coming soon. It isn’t going to be produced like, say, the Toyota Corolla, the world’s second-most popular vehicle, at 966,000 sold globally, but something more modest, around 500,000 per year. Of course, jumping from 20,000 Tesla Model S per year to 500,000 Tesla Model E per year is anything but modest.

The biggest problem with such an expansion is going to be whatever supply that Tesla Motors cannot control, specifically the lithium-ion battery pack, made up of thousands of Panasonic 18650 cells. A recent announcement detailed an extended agreement between Tesla Motors and Panasonic, which will supply some two billion 18650 cells over the next four years. I’d estimate that this would equal something like 500,000 vehicles over the next four years, but Elon Musk is pointing to a much higher number, saying…

“If we’re to produce 500,000 vehicles a year from the former NUMMI plant, then we need cell capacity that is commensurate with that, which is maybe bigger than all the lithium ion production in the world today. There’s going to need to be some kind of giga-factory built.” [italics mine].

So, who’s going to build the new battery factory? If Tesla Motors can’t control the supply of the all-important lithium-ion battery pack, then any future plans are going to be moot. It’s going to have to be Tesla Motors.

Image © ruhrmobil-E Foter.com CC BY-NC-ND

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