Tesla aiming to manufacture their own battery cells to reduce dependence on Panasonic.
According to five current and recent employees, Tesla is designing the means to manufacture their own battery cells en masse. This is in spite of an extensive partnership deal signed with Panasonic, who have been making battery cells for Tesla since 2014.
It’s no big secret that the battery pack and battery cells are by far the biggest cost component of Tesla’s electric vehicles. This development will definitely help to lower the cost of production on Tesla’s electric vehicles while cutting out data and resource sharing with any outside vendors and partners.
Earlier this month at Tesla’s annual shareholders meeting, CEO Elon Musk admitted that the company had been “battery-constrained”. What this means is that Tesla’s shortage of batteries limited their production and sales of their electric vehicle and storage systems such as their Powerwalls and Powerpacks.
If Tesla can pull this off, that would complete their vertical integration as they would be developing, manufacturing and selling their own product. They would be hard-pressed to scale their manufacturing process for these battery cells as they continue to struggle to do the same for their vehicle production.
The “secret lab” in question
Tesla currently makes most of its batteries at the Gigafactory in Sparks, Nevada, which it jointly owns with Panasonic. In light of Tesla researching their own battery option, it makes sense that they would divert resources to a separate facility.
The battery research and development division is located at the Tesla’s Kato Road facility a few minutes drive from the company’s car plant in Fremont, California. There, Tesla aims to design prototype advanced lithium ion battery cells, as well as develop processes that will allow mass production once it’s ready to go to market.
Even if Tesla is successful in developing this new battery, this does not mean that they will cut ties entirely with Panasonic. Tesla employees that are kept apprised of supplier negotiations say that the company will be working with Panasonic and LG in producing the batteries that will go into the first vehicles manufactured at the new Shanghai factory. The new factory is slated to be operational by the end of the year, and initiate mass production in 2020.
Tension between partners
This initiative to bring battery manufacturing in-house has been public knowledge for a while now. At Tesla’s annual shareholder meeting in June, Musk encouraged investors to place their focus on two company priorities, namely complete self-driving vehicles and scaling battery production.
On the latter point, he dropped no details however on how he intended to do so, including the reason for the $218 million acquisition of energy tech company Maxwell Technologies back in May this year.
Tesla CTO JB Straubel said that,” We’re taking all the moves required to be masters of our own destiny here. I think through all the experience we’ve developed with partners and otherwise, we will have solutions for this.”
His comments follow reports of tension between the two companies. In January this year, Panasonic made a deal with Toyota to build car batteries together in a joint venture. A few months later in April, Panasonic said it would temporarily freeze their investments in Tesla Gigafactories.
Musk hit back a few days later, blaming Panasonic for delaying Model 3 production by lowering capacity, threatening to pull financing until cell line capacity was brought up to speed.
Panasonic seems to have come out on top though, as in recent years many Tesla employees have been moving over to Panasonic, lured by better compensation, clear policies on schedules and time off. As for Tesla’s aspirations on battery production, only time will tell.
