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Tesla's Cost Advantage Destined To Disappear

Tesla's Current Cost Advantage Is Temporary

Tesla uses small, cylindrical 18650 lithium-ion cells, named because each is 18mm in diameter and 65mm long. These are wired together to form a flat battery pack that stretches beneath the floor of the vehicle.

By using commoditized 18650 cells (the same ones used in laptops), Tesla (TSLA) has already reached $230/kWh battery production costs, significantly below peers providing an important cost advantage. Most auto manufacturers such as General Motors (GM) and Ford (F) however are using large-format cells, betting that they will eventually be lower cost. The future winners in EVs will be whomever can lower costs fast enough to sway consumers to purchase EVs over conventional vehicles.

As I will outline, Tesla faces a harrowingly difficult task of scaling battery production faster than competitors, as it is solely responsible for scaling production of its chosen technology. The competing technology (large, prismatic batteries)… Read More …