Electric Cars: Tesla’s value drops $50 billion as cheaper batteries three years away

Investors slashed $50 billion from Tesla Inc’s market value on Tuesday (22 September) despite CEO Elon Musk’s promise to cut electric vehicle costs so radically that a $25,000 car that drives itself will be possible, but not for at least three years.

Nothing Musk discussed about batteries is a done deal,” said Roth Capital Partners analyst Craig Irwin. “There was nothing tangible.”

Tesla’s new larger cylindrical cells will provide five times more energy, six times more power and far greater driving range, Musk said, adding that full production is about three years away.

To help reduce cost, Musk said Tesla planned to recycle battery cells at its Nevada “gigafactory,” while reducing cobalt – one of the most expensive battery materials – to virtually zero. It also plans to manufacture its own battery cells at several highly automated factories around the world.

Shares in two battery suppliers to Tesla, South Korea’s LG Chem and Japan’s Panasonic Corp, fell after the announcement.

Increasing the EU’s domestic supply of critical raw materials and cutting external dependencies got top billing in a new European Commission strategy on Thursday (3 September), as the bloc started to get serious about its Green Deal and digital agenda.

Tesla will produce the new battery cells initially on a new assembly line near its vehicle plant in Fremont, California, with planned output reaching 10 gigawatt-hours a year by the end of 2021. Tesla and partner Panasonic Corp now have production capacity of around 35 gWh at the Nevada battery “gigafactory”.

Tesla aims to rapidly ramp up battery production over the next years, to 3 terawatt-hours a year, or 3,000 gigawatt-hours – roughly 85 times greater than the capacity of the Nevada plant. Musk said Tesla could supply batteries to other companies.

As automakers shift from horsepower to kilowatts to comply with stricter environmental regulations, investors are looking for evidence that Tesla can increase its lead in electrification technology over legacy automakers who generate most of their sales and profits from combustion-engine vehicles.

While average electric vehicle prices have decreased in recent years thanks to changes in battery composition, they are still more expensive than conventional cars, with the battery estimated to make up a quarter to a third of an electric vehicle’s cost.

Some researchers estimate that price parity, or the point at which electric vehicles are equal in value to internal combustion cars, is reached when battery packs cost $100 per kilowatt hour (kWh).

Tesla’s battery packs cost $156 per kWh in 2019, according to electric vehicle consulting firm Cairn Energy Research Advisors. 

 

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