Tesla Motors (TSLA) has bounced back after Monday’s lockup drop. Nonetheless, many comments I received on my Tesla posts show skepticism, and ask what is so special about Tesla. This week’s Economist tackles that question. Simply put, Tesla went about designing its battery packs the Silicon Valley way, while Chevy with its Volt and Nissan with its Leaf went about it the car company way.
Tesla assembles its packs from thousands of battery cores of the sort found in laptop batteries, leveraging a scale manufacturing ecosystem. The car-makers redesign the batteries into large-format cells, laminated together in tiles, creating a custom-maunfacturing requirement for each car-maker. Which approach do you expect is more scalable and cost-effective?
Tesla puts 6,831 battery cores into blocks, and assembles blocks into its battery pack, which is liquid-cooled. The Leaf uses 192 tiles, each the size of a magazine, and ties four tiles to make a module. The Leaf’s battery pack is made from 48 modules and is air-cooled. Which approach to cooling do you think better extends battery life and manages environmental changes?
Tesla may see more competition from battery-pack makers like A123 Systems (AONE). They also design a custom battery, rather than using laptop cells, and modify the chemistry to make them less prone to over-heating and easier to cool. It also makes them less energy intensive, requiring more batteries for the same drive time, although perhaps they can be managed differently to last longer (ie. allow a lower level of discharge before recharging). Another new entrant is Coda, which initially planned to use A123 batteries but switched to designing a custom battery with a Chinese company that is one of the largest makers of laptop cores.
Game on! Tesla’s stock is holding up while A123 is still well below both its IPO price and its first-day pop. My bet is on the Silicon Valley way.