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Anderman report on Tesla’s battery prospects with the Gigafactory

In his new “Tesla Battery Report”, Dr. Menahem Anderman, independent battery expert, consultant and head of the Advanced Automotive Batteries conferences and publications, concludes that with the planned Gigafactory, now targeted for Nevada, Tesla may succeed in accomplishing what the US Government failed to achieve—i.e., to establish a domestic Li-Ion battery industry.

However, there remain a number of questions and risk factors associated with the project for Tesla, Anderman notes, including profitability, participation of materials suppliers, and macro trends in the market such as demand, the continuation of government subsidies, competitive battery technology and the role played by ZEV credits.

Anderman projects that Tesla and Panasonic will most likely reach an agreement for a staged investment approach by Panasonic—e.g., 5- to 10-GWh plants at a time. Based on his analysis of materials, assembly and costs, Anderman suggests that Tesla will not see much cost reduction from the Gigafactory until 2018 or later.

Battery cost will go up slightly in 2017 due to high depreciation charges, but larger capacity per cell will neutralize the increase by 2018, Anderman suggests.

Anderman thus suggests that the price of the 2017 new model will be in the range of $50-80k—the market segment of sporty mid-luxury sedans such as the BMW 5 series.

However, a pack cost much below $200/kWh is unlikely before 2020, Anderman concludes. This would bring the proposed 70-kWh pack for a 200-mile D class EV cost to (or above) $14,000—or 40% of the proposed Model-3 vehicle base price of $35k. While Tesla could offer an entry-level version with 50 kWh (at close to $10k per pack), such a vehicle would not quite attain 200 miles per charge, Anderman concludes.

If the Gigafactory does realize 35 GWh or production, Anderman’s assessment finds that pack pricing for the 2025 time scale could be as low as $167/kWh—i.e.,$11,700 for a 70-kWh pack.

Annual sales, excluding China, will be significant, Anderman suggests—perhaps 150,000 cars by 2020—but short of utilizing the capacity of a 500,000-pack factory. If sales in China are significant, the total number may exceed 200,000 by 2020, but Tesla will have to shift some production there. Anderman notes that China is already demanding that Tesla invest in China sooner rather than later.

18650 cells vs. large format. Tesla famously has built its battery packs with thousands of 18650 format cells, rather than opting for fewer, larger format cells as major automakers have done. Tesla’s module design with many cells in parallel allows for single-cell failure without bringing the whole battery down. Current high-energy 18650 cells deliver 50% higher energy per unit weight than current large cells.

However, Anderman notes, as the industry gains more confidence, next-generation large cells for 2016-2017 will use more energetic materials in a better optimized package and will see energy density enhanced by 30%. The analyses of most automakers, supported by estimates from Korean battery makers, is that a pack based on a large pouch will achieve cost parity with the 18650 design in 2-3 years, with better potential for lower cost in later years.

Anderman projects that by 2018, the 18650 approach will only offer 15-20% better energy per unit volume and similar cost to that of the large-cell packs.