Tesla's Battery Technology Pushes EV Movement Forward

| About: Tesla Motors (TSLA)

There are many who are skeptical of Tesla Motors' (NASDAQ:TSLA) long term chances for prosperity and do not believe that the Silicon Valley company will be able to successfully compete with the large auto makers, who they think are now destined to eat its lunch.

"There's a lot of competition coming from companies that really have an ability to scale up -- Nissan, General Motors (NYSE:GM), and even Toyota (NYSE:TM)," asserts Michael Yoshikami, who manages about $1 billion as the chief investment analyst at YCMNet Advisers, and doesn't own Tesla stock.

I do. My Silicon Valley 2.0 portfolio has a small stake in the company. I am not a doubting Thomas. Do not count me among the skeptics who believe that Tesla cannot be resurrected from its huge burden of debt. The company's fourth-quarter net loss rose to $51 million from $23 million a year earlier. I think the struggling pioneer of the electric car movement will eventually recover from its fiscal wounds and profit.

Tesla's superior battery technology is its most important asset and could be the savior of the nascent EV movement. The company's Roadster has a driving range of 245 miles, the best in the EV industry.

Tesla's lithium-ion EV battery system is universally regarded as the most advanced. Furthermore, Tesla is a trendsetter. They are to the EV movement what Apple (NASDAQ:AAPL) is to the computer and mobile device market. The growth of the electric car market is largely dependent upon advances in battery technology. The prohibitive cost of lithium-ion batteries and relatively short distances that electric cars can travel between charges is the chief barrier to mainstream EV acceptance.

Toyota and Daimler are dependent upon Tesla's economical laptop battery technology. Tesla designs the battery pack, motor, transmission, charger and software for Toyota's RAV4 EV scheduled to go on sale next year. Tesla also provides the battery pack for Daimler's electric Smart vehicle. Revenue from supply agreements with the two large auto makers have helped to sustain Tesla while it prepares to bring its Model S sedan, the company's next electric car, to market next year.

Panasonic (PC) has also partnered with Tesla in order to get a foothold in the lithium-ion battery market, which is expected to grow to over 40 times its current size in the next five years. Sanyo Electric is the world's largest maker of batteries. Panasonic, the majority shareholder in Sanyo, now supplies most of the lithium-ion cells used by Tesla.

A prototype of the Models S, which can be driven up to a production record 300 miles between charges, is making its European debut at the Geneva Motor Show. Recharging can take 45 minutes. Tesla may be addressing the problem of having to wait so long. The battery pack is designed to be changed out in less time than it takes to fill a gas tank. Silicon Valley startup Better Place is building convenient cutting edge battery swap stations that are designed to get motorists back on the road in a few short minutes.

While battery swapping is an option with the Model S, Telsa does not plan to follow the Better Place plan, which is designed to work with standardized batteries. "Different batteries suit different cars," says Peter Rawlinson, the chief engineer for vehicle engineering at Tesla.

Last fall, Better Place formed a partnership with General Electric shortly after the later introduced its WattStation electric car charger. Better Place is a pioneer in the field of large scale EV battery charger deployment. GE, a newcomer, is working to integrate WattStation into the Better Place service network.

Better Place plans to put 10,000 Renault electric cars with switchable batteries on the road in Israel and Denmark. The partnership will help provide financing for the battery packs. GE and Better Place also plan to work as a team to promote EV corporate fleets. Pilot programs are targeting the San Francisco Bay Area, Honolulu and the Canadian province of Ontario. Locations in Asia, Europe and Australia are also part of the pilot program.

GE plans to deliver its first WattStation charger this summer. The conglomerate is trailing two Silicon Valley companies, ECOtality and Coulomb Technologies, that have already begun installing charging stations, mostly on the west coast. ECOtality is the biggest recipient to date of subsidies from the U.S. Department of Energy's EV Project.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.