Tesla's Battery Strategy in Focus
The author is an analyst of NH Investment & Securities. He can be reached at j.ko@nhqv.com. -- Ed.
We expect Tesla’s ‘Roadrunner’ project to focus on cost improvement strategies related to rechargeable batteries in an effort to achieve cost parity for EVs. Additional insight into relevant factors governing improvement for rechargeable battery production-related profits is also expected.
Tesla’s ‘Roadrunner’ project to focus on rechargeable batteries
Recent media reports have indicated that Tesla plans to unveil details about its ‘Roadrunner’ project for rechargeable EV batteries around mid-May at a ‘Battery Day’ (tentative name) event. While it is difficult to predict whether the project will be announced, considering Tesla’s rechargeable battery-related interests and corporate M&A history, the Roadrunner project is expected to focus on: 1) reducing rechargeable battery costs via the development of next-gen technologies; and 2) expanding EV supply.
First, we expect Tesla to share its strategies related to reducing rechargeable battery-related costs. In particular, there is the possibility of Tesla highlighting the dry electrode technology of Maxwell (US company acquired by Tesla in 2019) and the rapid rechargeable battery production system of Canada’s Hibar Systems. If Tesla uses Maxwell’s dry electrode technology, adoption of semi-solid batteries looks feasible.
In addition, Tesla is anticipated to share pricing forecasts for rechargeable batteries, which account for a high portion of EV production costs (about 50%, based on battery pack). The firm is also expected to give its predictions for when cost parity (vs internal combustion vehicles) will be achieved for EVs and when rechargeable battery costs will fall to under US$100/kWh. We note that at its recent EV Day, GM mentioned plans to cut rechargeable battery costs to less than US$100/kWh and accelerate sales by lowering EV prices.
Factors governing rechargeable battery production costs to be clarified
Going forward, the growth rate of the rechargeable battery market is forecast to depend more on quantitative growth factors (Q) than on price factors (P). We note that the situation regarding cost factors (C) is expected to develop favorably. Despite product price decline, rechargeable battery makers are seeing steady sales growth and improved profitability. In particular, if Tesla implements the above-noted cost improvement strategy, material cost reduction and productivity improvement are likely.