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Jul 23

Making Batteries, Not Cars, Will Be Tesla’s Priority in the Future

Ever since it was founded back in 2003, Tesla Motors has been regarded as a car manufacturer first and foremost, despite the fact that the company itself has been stating that its primary goal is to supply other car makers with highly-efficient EV batteries, in an effort to accelerate the adoption of green vehicles, and developing EV technology, rather then selling cars, is its long-term priority. But, due to the immense success of the Model S, the all-electric sedan Tesla introduced in 2012, along with the fairly positive reception of the Roadster, the first vehicle produced by Tesla, this company with a pretty innovative business model has become a serious player in the electric car market.

The fact that the Model S has achieved such an enormous success has led many people to start wondering whether Tesla is thinking about abandoning its original mission and turning its focus to getting high sales figures. However, Tesla’s CEO, Elon Musk, insists that battery production is the company’s top priority, and the fact that they plan to invest $5 billion in a high-capacity manufacturing plant, dubbed “Gigafactory”, which should be able to churn out 500,000 EV batteries a year, is proof enough that they still consider themselves a battery supplier first and foremost.

Considering that building the Gigafactory will cost Tesla more than double what they spent on the development of the Model S, which was estimated to cost $1.5 billion, it’s safe to say that a shift in focus is imminent, in an effort to further develop EV technology and build batteries that are more affordable and can provide a better range, which means that Tesla is addressing some of the biggest hurdles for electric cars – range and price. With Tesla making its own batteries, production costs are bound to drop by at least 30%, according to the most modest estimates, which will reduce the sticker price of Tesla’s and other car makers’ EVs significantly. What’s more, Tesla claims that the batteries that will be produced in the Gigafactory will extend the range of the Model S by anywhere between 10 and 15 percent.

Once the Gigafactory goes online, which is expected to happen somewhere around 2017, it will be able to supply all major car makers that produce electric vehicles, but also other companies and households that could use lithium-ion batteries to store electricity. While there is no doubt that this project will be a major financial burden for Tesla, it will also be a huge additional revenue source in the years to come, and it is expected to surpass Tesla’s profits from car sales in about a decade. On top of this, the Gigafactory can help increase Tesla’s stock price, as investors realize the great revenue potential from other segments that are not related to car sales.

To conclude, with its intentions to build the Gigafactory, Tesla is clearly seeking to shake off the image of a company that only produces cars, and is ramping up efforts for developing battery packs and battery cells that are more efficient and more affordable, thus contributing to the promotion of electric vehicles and sustainable transport.

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