Sponsored by SurfShark VPN. Click on the link in the description and enter promo code UNDECIDED
for 85% off and 3 extra months for FREE!
Let’s talk about some hints that Tesla dropped in the last quarterly call for what we might
expect at the upcoming battery day event. And how Tesla is pulling something from Apple’s
playbook.
I’m Matt Ferrell ... welcome to Undecided.
Last year I put out videos on why I thought Tesla bought Maxwell Technologies, and also
dove into the details of the Jeff Dahn Research Group’s paper about the million mile battery.
Since those videos came out there’s been even more news from Tesla around their purchase
of Hibar, details on the team working on Project RoadRunner, and the CATL partnership in China
to supply lithium iron phosphate batteries (LFP) for the Tesla Model 3 produced there.
But more on that in a minute. All of those moves are providing pretty interesting indicators
for where Tesla’s big battery day announcement may be heading. However, for me, some of the
most interesting hints were dropped on the Tesla Q2 call that happened a few weeks ago.
Those hints are helping to add a little context and clarity that’s looking like a subtle
wink and nod from Tesla.
Back in May of 2019, when Tesla purchased Maxwell Technologies, there was a lot of debate
around the primary reason for that purchase. Was it for the dry battery electrode manufacturing,
their ultracapacitors, or a bit of both? To me it seemed pretty clear that it was primarily
about the dry battery electrode manufacturing technique. And something they said on this
recent Q2 call reinforced that:
> “The real limitation on Tesla growth is cell production at affordable price. That’s
the real limit. So that's why we're going to talk about a lot more about this on Battery
Day because this is a fundamental scaling constraint.” -Elon Musk, CEO
Tesla’s production and sales rate is increasing dramatically and being able to supply their
car and Energy business with enough cells is their biggest hurdle. During the Model
3 ramp up they were cell-starved and had to redirect production from Tesla Energy into
the car side of the business to make it happen.
Batteries built using the DBE method show greater than 300 Wh/kg with a path to over
500 Wh/kg. By comparison, Tesla’s current battery technology, which is considered one
of the highest specific energies available today, is believed to be around 250 Wh/kg.
That means this technique could add about 23% to Tesla’s current battery energy density
with room to double it.
But it’s not just about increased energy density, it’s also cost reduction and production
capacity. The typical battery production process involves using wet, toxic chemicals to create
the cathode, which then has to be dried and baked off. That involves a lot of floor space
and ovens for that step in the process. With the DBE method, you skip that step completely
which results in a 16x production capacity increase. You’re able to produce a lot more
batteries in the same amount of factory space. You also save cost by eliminating that step
as well for about a 10-20% cost reduction.
It’s a one-two punch for rapidly scaling up the number of cells in each factory, as
well as potentially getting some energy density gains on top of that. Pair the dry battery
electrode method with Hibar Systems that they acquired late last year, which is a company
that specialized in automated assembly systems including vacuum filling systems for Lithium-ion
batteries, and you can start to see Tesla’s automated battery factory taking shape.
Which brings me back around to Jeff Dahn’s research team that’s been quietly working
behind the scenes on a new battery chemistry for Tesla. This one is still in a black box
of secrecy, but I’ve spoken to several people who are far more familiar with the tech and
players involved, and each one has said virtually the same thing to me, “You’re going to
be blown away.” Take that with a grain of salt, but I’m inclined to believe some of
the insider hype I’ve been hearing. This is pure speculation on my part, but I don’t
expect this to be a solid state battery. That kind of tech is still years away. I think
an updated chemistry is going to be an evolution of where lithium ion battery tech has been
heading, but it’s going to be a jump in longevity and energy density.
Again, this development pairs nicely with the Maxwell Technologies DBE for a ... what
would that make it ... a one-two-three punch? So I think it’s safe to say we should expect
an improved battery for longevity and energy, but don’t get your hopes up for a car that
will go 600 miles. This is something I’ve been saying for a while, and I get asked about
it a lot. I had some lengthy and lively conversations about it with folks at the Fully Charged Live
event in Austin, Texas at the beginning of ... wow ... face to face conversations ... that
feels like a different era.
Anyway, I’ve been pushing the point of view that we should be expecting similar ranges
for roughly the same amount of money. The big play here is scale and cost. Fewer cells
in a battery pack reduces weight, which also helps with range, as well as frees up those
cells to produce more cars, Powerwalls, Megapacks, etc. To me the following quote was the biggest
hint of that on the Q2 call:
> “I think the new normal for range is going to be, just in U.S. EPA terms, approximately
300 miles. So I think people will really come to expect that as some number close to 300
miles as normal.” -Elon Musk, CEO > “They want some reasonable margins. So
I think 300 is going to be really -- or close to 300 is going to be a new normal, call it
500 kilometers, basically, roughly.” -Elon Musk, CEO
It doesn’t mean that Tesla won’t offer higher end models with some crazy ranges,
but the base models are going to keep this 300 mile baseline target. It’s good for
the business and for consumers. It avoids the Osborne effect, which Tesla could be in
danger of if they oversell the hype for the new battery tech and it isn’t available
across the board in every model. Why buy a Model 3 today when you can get the crazy 600
mile version sometime later. They don’t want that ... we don’t want that.
In case you haven’t heard of the Osborne Effect, it’s a reference to a computer company
from the early 1980’s that went bankrupt by over-hyping a future computer that killed
all of the sales for their current models. It’s why I keep telling people who ask me
if they should wait to buy their Tesla until after battery day, "no ... don’t wait."
If you want and need a car right now, buy it. A new chemistry is most likely going to
show up on limited models, like the Roadster and perhaps the plaid Model S. It’s going
to take time to ramp up, drive those prices down, and be able to integrate it into more
and more models. But even then it doesn’t mean that we’re suddenly going to see a
600 mile Model Y.
And that brings me to the final hint from the Tesla Q2 call, which involves battery
partnerships like CATL. This is another reason why I’m telling people to not wait to buy
a Model 3 or Model Y. Tesla is getting more flexible about using whatever battery technology
is best for the current need and job. That's something I’m a big fan of. There isn’t
one tech to rule them all ... it’s all about trade-offs.
> “What we're seeing with our passenger vehicles is that our powertrain efficiency
and tire efficiency, drag coefficient like basically all of the things that, like, you
know, our HVAC, going to a heat pump, basically our total vehicle efficiency has gotten good
enough with Model 3, for example, that we actually are comfortable having an iron phosphate
battery pack in Model 3 in China. And that will be in volume production later this year.”
-Elon Musk, CEO
In China they’re using lithium iron phosphate (LFP) batteries instead of their nickel manganese
cobalt (NMC) batteries. LFP batteries don’t have the same high specific energy, or energy
density, as NMC batteries, but as Elon pointed out in the call, that’s fine. The internal
specs don’t matter ... it’s all about the user experience. If you’re able to hit
that 300 mile range with an LFP battery in a Model 3, along with keeping prices down
even though it adds a little weight, that’s not a problem. But in the Tesla Semi, where
every pound matters because it will affect how much cargo you can carry, you’re going
to want to get the most energy dense battery pack you can. Less weight, more miles, means
more cargo.
Being nimble and flexible like this with suppliers also means Tesla isn't dropping their long
standing relationship with Panasonic, as was rumored a while back. And the rumors that
Tesla may be ramping up to produce their own batteries is most likely true given what we’re
seeing and hearing about Project RoadRunner ... and expanding battery partnerships solidifies
that. Tesla needs as many cells as they can get, so producing their own, continuing to
ramp up battery production with Panasonic, while adding CATL and perhaps others down
the road makes perfect business sense.
Which leads me to Tesla pulling from Apple’s playbook, but before I get to that I’d like
to thank Surfshark for sponsoring this video. I know we’re not traveling much right now,
but I still like to use a VPN when I want to protect my privacy online.
SurfShark encrypts all of the data you send over the internet, so your private data like
passwords, messages, photos, videos, and whatever you’re doing online … stays private.
That means you can protect your online identity from tracking and commercial targeting that
we see with so many services today. With SurfShark’s CleanWeb, it will block ads, trackers, and
malicious websites making it safer to use the internet even at home.
One of the best parts of SurfShark is that it’s easy to set up on all your devices
whether that’s iPhone or Android, Mac or PC. SurfShark is the only VPN to offer one
account to use with an unlimited number of devices. And whenever we do end up traveling
more again, I always use a VPN when using free Wifi in airports and hotels.
SurfShark offers a 30-day money-back guarantee, so there’s no risk to try it out for yourself.
Use my code to get 85% off plus 3 extra months for free! But hurry ... this offer
is only available for a little while longer.
Link in the description below. Thanks to Surfshark and to all of you for supporting the channel.
I know people hate it when I make this comparison, but Tesla has a lot of similarities to Apple.
Stick with me on this before starting a flame war in the comments. Tesla may differ from
Apple in motivation, but purely from an operational point-of-view there’s a lot of similarities.
Apple’s vertical integration strategy centers around hardware, software, services, and retail.
Owning that full stack allowed Apple to bring the iPhone to market years before the competition.
Or to transition all of their mobile products and software to a 64-bit architecture way
before anyone else. And also to create a smart watch that has no real competition to this
day.
Tesla is pulling off something very similar with their vertical strategy, which also involves
hardware, software, services, and retail, but adds manufacturing to that mix. But taking
a page from Apple’s playbook, they’re opening up and expanding their battery supply
chain. Because of Apple’s size and scope they’re able to negotiate deals that lock
up supply chain resources from multiple sources for things like RAM. Tesla is able to do something
similar because of their growing size and scope. They’ll be able to negotiate deals
and lockup significant portions of battery production throughout the supply chain that
their competitors can only dream of. And by locking up those deals at low prices it will
make it harder for the competition to catch up in a cost effective way.
I always get a lot of hate when I make this kind of comparison, but keep an open mind
and take a look at a great article from Ark Invest on this exact topic. I’ll put a link
in the description. It does a great job summarizing my take on it. My favorite bit from that article
is showing Apple’s revenue trajectory from when they started to claw themselves back
from near bankruptcy in the early 2000’s to now, compared to where Tesla has been going
from 2014 to now. We’re watching the next iPhone moment happen in real time here.
Unless Tesla has to push battery day again due to health concerns, there’s going to
be some really exciting news coming out of Tesla at the end of September. We should be
seeing the unveiling of Project Roadrunner, which is going to have a heavy focus on battery
manufacturing and the incredible efficiencies that Tesla has been able to gain. We’re
most likely going to hear about a new chemistry that’s going to unlock the full potential
of everything from the new plaid Model S to the Tesla Semi. And we should get more details
on supply chain partnerships and how Tesla is expanding its battery offering to support
their growing battery needs, but also to use the right battery for the right job. And for
Tesla’s competition that thought they were about to catch up or pass Tesla on a spec
war, they may be getting a little bit of a surprise on that front.
Now jump into the comments and let me know what you think is going to happen on battery
day. And as always a special thank you to all of my Patrons and a special welcome new
new producer, Inku Kang. If you liked this video be sure to check out one of the ones
I have linked right here. Be sure to subscribe if you think I’ve earned it. And as always,
thanks so much for watching, I’ll see you in the next one.