Tesla Does Cars the Silicon Valley Way

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.

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About Duncan Davidson 228 Articles

Affiliation: NetService Ventures

Duncan is an advisor to NetService Ventures, where he focuses on digital media and the mobile Internet.

Previously he was at four start-ups: Xumii, a mobile social service based on a Social Addressbook; SkyPilot Networks, the performance leader of wireless mesh systems for last-mile access, where he was the founding CEO; Covad Communications (Amex: DVW, $9B market cap at the peak), the leading independent DSL access provider, where he was the founding Chairman; InterTrust Technologies ($9B market cap at the peak), the pioneer in digital rights management technologies, now owned by Sony and Philips, where he was SVP Business Development and the pitchman for the IPO.

Before these ventures, Duncan was a partner at Cambridge Venture Partners, an early-stage venture firm, and managing partner of Gemini McKenna, a joint venture between Regis McKenna's marketing firm and Gemini Consulting, the global management consulting arm of Cap Gemini.

He serves on the board or is an adviser to Aggregate Knowledge (content discovery), Livescribe (digital pen), AllVoices (citizen journalism), Xumii (mobile social addressbook), Verismo (Internet settop box), and Widevine (DRM for IPTV).

Visit: Duncan Davidson's Blogs

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