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Battery Cells: Tesla Could Lose The Competition For Independence

Mar. 05, 2020 4:37 PM ETTesla, Inc. (TSLA) Stock316 Comments
The European View profile picture
The European View


  • Several perspectives can be taken when evaluating Tesla. Especially important are patents or certain other advantages in the production of a product.
  • With EV's, especially battery production is an essential factor. Existing dependencies can harm the market position.
  • Tesla investors must not forget that Tesla is highly dependent on other companies. On the other hand, the competitors are working tirelessly to lose this dependence.
  • Volkswagen, in particular, is to be taken seriously here and could overtake Tesla as primus in the EV sector.


I am a fan of Tesla (NASDAQ:TSLA). This relates above all to the aesthetics of the cars and the disruptive will of the company to change the world towards more environmentally-friendly mobility. However, I think that investors must distinguish between two perspectives. One technical orientated perspective is to compare technical figures like the performance, range of the individual vehicles, etc. Another perspective is to compare the financial figures, financial outlook and in this case assets like know-how, patents, and a competitive moat. These two perspectives can overlap sometimes. Especially a technical advantage secured by patents can give a company a certain moat. As an investor, the second perspective is crucial for me in particular. I've long argued that Tesla is losing part of its edge. In this article, I will mainly focus on the importance of battery production. These could prove to be a bottleneck in the production of EVs. And this is where Tesla is facing massive competition.

Lithium-ion battery demand will require more than 200 gigafactories

First of all, the global demand for lithium-ion batteries will increase. Especially because these batteries are not only used in EV, but the demand for such batteries is also increasing in other areas:

(Source: Annual lithium-ion battery demand)

If all the manufacturers in the world want to replace their cars with battery vehicles, a single large factory is of course far too small. Just take a look at Tesla. Together with Panasonic (OTCPK:PCRFF;OTCPK:PCRFY), Tesla manufactures batteries with over 35-gigawatt hours in its Gigafactory 1 in Nevada (however, Tesla uses battery cells from Samsung SDI and LG Chem (OTCPK:LGCLF) for its stationary energy storage products). Accordingly, increasing demand would require 40+ gigafactories with a capacity of Gigafactory 1 by 2030. And here is a problem because batteries account for

This article was written by

The European View profile picture
Runner of the TEV Blog | Private InvestorI am a long-term oriented investor and in my early thirties. I hold a law degree and a doctorate in law and love investing and talking about my and others' investments. I regularly write about my research and investments on various investor platforms and the TEV Blog. **My articles represent my opinion only and in no way constitute professional investment advice. It is the responsibility of the reader to conduct their due diligence and seek investment advice from a licensed professional before making any investment decisions.**

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (316)

sestak22 profile picture
2Q for tesla is dismal recommendation sell, sell.....
Looks like Tesla's arrogance ran off Panasonic... and in Tesla's typical fashion of pushing the illegal envelope, started making Panasonic battieries the same way they did before...calling them Tesla batteries. Did they change anything after Panasonic left? No. Then they are guilty of using Panasonic's patented design.
Roger Knights profile picture
Tesla Working On Goodenough's Glass/Solid-State Battery?
13-minute Nov. 9 YouTube video (219,000 views, 1175 comments) by Kaia Tingley a “HyperChanger”

He says that certain clues point to Tesla having made progress on an incredible battery breakthrough, to be announced on Investor Battery Day next month. The main clue to me is the skyrocketing of TSLA in recent months, I assume based on leaks. Maybe this is what ARK is basing its sky-high price target on (?).

If Musk pulls this off—Man! What a home run!
Bears—be wary until after the announcement.

Davewmart profile picture
I'm working on teleportation.

Initially I am testing it by transferring money from your account to mine.

Care for a trial?
Roger Knights profile picture
Read the link. There's a non-zero chance that Nobelist John Goodenough has another winner on his hands. Musk swings for the seats, and may have an exclusive-rights deal with him. If he does, a home run may be in the offing.

Musk's full-speed ahead behavior supports this interpretation. I.e., opening two factories, and now talking about a 3rd for the CyberTruck. Seeking only $2 billion in equity capital at $757 (maybe he thinks he won't need any when the battery is unveiled—or that he can raise more over $1000).

I'm a long-term bear and anti-Musker, but this breakthrough COULD happen, and Musk COULD be the one to seize the opportunity first. Or it could be a lot of baloney. We'll see.
Davewmart profile picture
@Roger Knights

I don't believe in magic batteries which appear when it is most convenient to the stock price more or less out of the blue.

Any breakthrough will take years before it is ready to go into cars in mass production.

I do believe in stock pumps, and gross misrepresentation and exagerration of early research projects, as we have umpteen examples of that behaviour.

This is the same breakthrough which was doing the rounds way back in 2017:

I put more credibility into alchemy and lead to gold than ARK's latest stock pump.
Randy Carlson profile picture
VW interestingly is going quite a bit further than just cell manufacturing by moving toward cathode material manufacturing as well.

Elon Musk, I wouldn't bet against him.

SpaceX, in a few years, dominating satellite launches (close to 70% market share). Elon Musk learned rocket science and destroyed the competition. Boeing still using 60+ year old rockets.

The Boring Company, 50x reduction is tunneling costs. Yes, 50 TIMES reduction in tunneling costs. First thing he did switched out diesel engine for electric.

I recall seeing Jim Chanos stating on CNBC that VW will destroy Tesla with E-Tron and Taycan. LOL. Not only were their ranges much lower (Taycan) but slower too and more expensive. And sales have been terrible.

VW/Porsche 185k Taycan, 191-202 mile range, fastest at 0-60 2.6, which is slower than Model S (half the price, twice the range).

Let's wait before declaring VW the winner. LMAO.

This is like that analyst on GM EV Day recently, stating GM was the leader of autonomous. Where do they find these so called "analysts", off the streets, online "degree"?
Usually people who own a porsche or a model s want to drive fast. At least in Europe.
But at an average speed of just 80 miles both Taycan and model s will go only 200 miles.
At 100 miles/h range may go down to 140 miles.
The next car people will buy, will be a hybrid!

Hybrids are just a stop gap measure. Look at the sales of hybrids, plummeting.

"But at an average speed of just 80 miles both Taycan and model s will go only 200 miles."

90% of statistics are made up on the spot.
@Entreri I suggest you learn about the real world range of the Taycan vs Tesla.
Discussed below thousand times.
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By Vanand Meliksetian - Mar 02, 2020 oilprice.com/...
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Davewmart profile picture


Good one!
wassa.h profile picture

Your post is a breath of fresh air..........But Vanilla????Yea..Why Not.
Tesla is looking at running out of money. Their recent money raise was to stay in business. There may not be months here to have a battery showdown.
Tesla is a fools play. A competitive disadvantage destined to cost those buying the shares large sums!
@San Marzano

Only fools have been the shorts, that is factually correct.

IPO $17, current stock price north of $700.

Short have lost huge, more than Shopify, will be more than Amazon before long, called the next Enron by the idiots shorts way back.

Several funds have gone bankrupt shorting Tesla in the past. It's not just amateur retail shorts losing huge and forced to cover.

The short cult is now 10% of the float.
Assuming people in China will postpone their car purchases by half a year, competitors will get closer to each other.
In crisis situations people may decide to buy a reliable car which will not cause them to stop for recharging for hours.
Tesla has already lost to the competition. Teslas are known for spontaneous fires. The charging rate can be changed over the internet by any hacker who wants to burn you house down and the car to a melted frame. When you buy the Tesla over the internet, you can't stop them from taking things back from you that you have already paid for. (Look at the suit in China in which Chinese received 2018 and 2019 parts that were part of a kit Tesla put together and then faked the manufacture in China just like we knew Elon Musk would do. (The dishonest thing.) Teslas have to be ordered over the internet and that fad has run its course. Car buyers want their Consumer Protection Rights and Laws. They don't want to fight an internet company for their money back. Much nicer to feel a BMW or a Mercedes at the car dealership who will also service your car. What happens when Tesla goes to a completely different frame, battery, and computer design. The old ones will no longer be supported with upgrades that keep them from catching on fire. Sorry, but the internet is not the place to sell cars. It was a fad that has run its course.
Tesla is the most vertically integrated auto manufacturer. They have a higher degree of product control than anyone. Little is said for example of their electric motors, but they are the most efficient on the market and both engineered and made by Tesla.

They will be having a battery announcement soon that will almost certainly put them far in the lead once again.

You are comparing what Tesla is doing today or very soon to what other manufacturers have said they will do sometime in the next few years. When that time gets here, Tesla will be well beyond where they are today. They are never standing still.
Leave it. Tesla is a large, smelly pile of 💩
Tesla is fraud. I am a tesla customer. Model 3 with performance tire have hell of road noise in car as if you driving a truck. Fsd not there after 4 yrs of talking on stage by Elon during Model 3 reveal. Cheat took $8k for fsd
Pretty sure any ICE car is louder than your model 3.
Model 3 is louder than many EVs. (Measured by Tesla Bjorn)
And EVs at speeds are not more quiet than ICEs. Just look at this list: www.alexonautos.com/...
Road noise and wind noise are dominant.
ICE is loud only under acceleration but not at constant speeds. Give it a try, stand next to a road and try to tell which one is EV by listening to them.
Please don't confuse the perma-bulls with actual data. Thanks!
fairestcape profile picture
Cell production is a challenge for ALL EV manufacturers (whether they are actual manufacturers such as Tesla, or aspiring to be EV manufacturers, such as all the rest of them. So far,most of what we've been hearing from legacy car makers about their "EV Revolution", is little more than press releases, vacuous press/investor conferences, and a rather shoddy spread of technologically-redundant offerings sporting tired old badges from the cars of yester-year.
While there is some truth in saying that all car makers are heavily reliant on 3rd-party cell manufacturers, Tesla's reliance is by far the lowest, and they also have the best and most viable strategies moving forward.
Tesla's major concern is battery cells - as it is a concern for all the others, but of greater concern for legacy OEM's is the startling degree to which they are behind Tesla in most other key areas of contemporary automotove technologies. Tesla only needs to worry about battery cell supplies... the others have infinitely more to be concerned about.
Endre Roth profile picture
You make a good point that battery production is critical in the coming years. I am just perplexed that from VW's cooperation with Northvolt, where they plan to produce 24 GWh in 2024 (!), less than Giga1 today, you conclude that Tesla is in danger of losing it's advantage. How come? Are there any other examples? This is very weak... You compare VW's 2024 'plans' to Tesla's 'reality' today. Do you think Tesla will sit still for 4 years? And as you probably realized VW is the most 'advanced' among legacy automakers (possibly GM being close second), which confirms that the entire legacy auto industry is at least 4 years behind Tesla.
And if we consider all the stuff around Maxwell and Hibar acquisitions and the potential announcements on the Battery and Drivetrain day next month, that lead could be easy more.
Oh, and I am not sure why you use past tense in your conclusion: "The successes that Volkswagen has achieved here". These are all plans, and they are working hard to 'catch up'. But so far there is no proof/sign that they are successful in that endeavor.
Thanks for the article.
DiggerDogg profile picture
"Lithium-ion battery demand will require more than 200 gigafactories"
This is the fallacy of article's analysis, and sounds like a PR Marketing Press Release from a dying manufacturer.

Panasonic's Lithium-ion battery cells have already been dropped from Tesla power train production for Model Y now shipping, and will soon be replaced as primary power for Model 3.
Tesla is now producing an in-house proprietary shaped package battery that does away with liquid electrolyte, saving much weight, and improving performance by 20%

The old-line automakers are still 6-years behind Tesla in battery development for charging times. capacity/weight ratios, and yields.
What's wrong with the 200 giga?
In fact more is needed. 200 x 35GWh / 75kWh = 93M cars. Right now there are about 80M cars on the road. And renewable energy storage requires an order of magnitude more batteries than EVs if governments demand zero emission power generations.
"The old-line automakers are still 6-years behind Tesla in battery development for charging times. capacity/weight ratios, and yields."

No they aren't. Taycan/Audi are ahead in charging speed. In fact in 2014 BMW i3 charged faster than any v2 supercharger now.

Capacity/weight: well no other automaker wanted to risk the NCA chemistry. So they chose NMC with 2-3% less energy density...

Many car companies have longer battery research history than Tesla.

"In fact more is needed. 200 x 35GWh /"

AFAIK Tesla GF-1 is designed to cater for far more than 35GWh. So IMHO the 200 GigaFactory number is not accurate.

Also that does not also account for any advancement in energy density and therefore more Potential Energy Output for same factory footprint.
Christopher Fortin profile picture
how is vw going to overcome it's reputational issues ?
Reputational issues don't seem to matter with Tesla's horrible quality and reliability and Musk's constant lies.
Mike Smitka profile picture
@Christopher Fortrin

Reputational issues?? — VW group sells more vehicles than anyone else, so maybe they have the industry’s best reputation!!
By building high quality EVs — assuming you’re referring to the clean diesel fraud fiasco. They definitely took a black eye here in the US over that. So having a full lineup of EVs is absolutely their redemption.

For some interesting perspective — watch Dirty Money Episode 1 on Netflix. While dirty diesel damaged VWs reputation in the US, the US is one of their smaller markets. Worldwide they are doing just fine, and over that period they became the worlds largest and most successful automaker. Pivoting into EVs and becoming a premier manufacturer of green vehicles, is the best way for them to repair their brand and grow/maintain their position and lead.  

With the Porsche Taycan, Audi e-tron and VW e-golf, they’ve got a solid start on a growing lineup of EVs and have committed to building a full line-up of 70 different cars in the next eight years. While that may seem ambitious, as one of the world’s largest auto manufacturers VW has a track record of delivering. If they even hit half that goal they would be way beyond what TSLA can probably do (esp considering the massive amount of capital Tesla would need to catch up with VWs massive 100 factory capacity).

They are somewhat behind Tesla in a number of ways, but with the Zwickau plant modernization (started 2018 due to be complete this year) and their new EV platform due out 2021, they are catching up fast and (at least in manufacturing) already have a sizeable lead in experience, available capital and ability to scale.
truwa profile picture
Thanks for making my point. I always stated that without a high-volume batter factory no legacy auto is a threat to Tesla. Only VW and GM is serious about EV production in high volumes but they lack battery factories now. Their joint-owned battery factories will be operational sometime in 2023. Until then Tesla has the field all by itself and will not stand still.

In four years full capacity Giga Berlin and Giga shanghai. Perhaps Giga Texas? FSD, solar glass roof, Megapacks, ridesharing network, superior software by OTA updates, superchargers everywhere.

All VW and GM hope to be is where Tesla is today in terms of EV production by 2024.
VW will rule the EV market
Do they have the Ring?
I see a future where Tesla ends up being a technology supplier and manufacturer for the auto industry and other industries, not a vehicle manufacturer. I believe this is the direction it ultimately should go. The big auto companies simply have more money and can retool existing facilities faster than Tesla can build. At some point investor money runs out for Tesla before can sustain any long term production of vehicles or they will have to sub out the vehicle production to one of the bigs. They need to lock up the supply chain. With their technology and controlling supply is where I think the real money is at for them.
"The big auto companies simply have more money and can retool existing facilities faster than Tesla can build. "
They built GF3 pretty quick with little capex. The retooling of Freemont was not as easy as you would think. Building from scratch might be the better way to go, especially with many countries willing to make attractive promises to Tesla to build a plant on their land.
Typical Tesla declared victory prematurely. GF3 is not really operational yet. Last fall Tesla admitted that low scale production would not really begin until May 2020 and would only be ~2,000 vehicles per week (less than half what Fremont does). And that was _before_ Coronavirus shut them down — now in the second month.

Also worth noting that GF3 is not a fully automated plant. Tesla has had significant issues with their automated production lines causing them scrap those at the Shanghai plant in favor of manual production with cheap Chinese labor ... probably similar to what they were doing in the Parking lots at Fremont a couple of years ago.

Kind of easy to say “we have a factory” when all you need is a warehouse with parking-lot style production lines staffed with cheap manual Chinese labor. Not changing the world that way though. ;)
doggydogworld profile picture
@fitzwilde - GF3 Phase One is only designed for 3k/week. It is ramping. They averaged >40% of rated capacity after resuming operations in February, should exceed 50% in March.

Stamping, BIW and paint are as automated as any plant. Final assembly might be a little less automated but that's common in China where labor is cheap.
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