Elon Musk promises battery revolution

The Tesla boss announces dramatic cost reductions on a “Battery Day”. That should help him sell his cars for $ 25,000 and make them competitive with combustion engines.

Tesla-Chef Elon Musk

Elon Musk is known for big announcements. Expectations were correspondingly high before “Battery Day”, which the electric car manufacturer Tesla, which he manages, organized on Tuesday at its plant in Fremont, California. Musk himself said some time ago that this would be “one of the most exciting days in Tesla’s history”. When he came on stage, he promised his audience that they would hear “really revolutionary things”.

Indeed, he called out bold goals. He promised Tesla would cut the cost of its batteries by more than half. That would be a huge step forward. Batteries are the main cost factor in electric cars today. Because they are so expensive, electric cars usually cost significantly more than vehicles with conventional internal combustion engines. Musk sees battery costs as the main hurdle for establishing electric cars in the masses. According to analysts, Tesla has so far cost 150 dollars per kilowatt hour with its batteries. A 56 percent reduction, as Musk is now promising, would bring the company to well below $ 100. And in the industry this is the threshold that makes electric cars competitive with combustion engines in terms of costs.

Range increase by 54 percent

Tesla wants to achieve the cost reductions in several ways. Musk spoke about innovations in the design and materials of the batteries, even the entire architecture of the vehicles is to be changed. In addition, there should be adjustments in the production process. In addition to the costs, all of this should also have a positive effect on the range of Tesla vehicles. According to Musk, it should increase by 54 percent.

The first savings according to the plan now announced should be realized within 12 to 18 months. Tesla wants to have reached the target of 56 percent in three years. Then Tesla wants to be able to sell a car for $ 25,000. The entry-level version of the “Model 3”, the cheapest car from Tesla’s product range, currently costs just under $ 38,000 in America. In Germany it is 42,900 euros. Musk also said Tesla plans to sell twenty million cars a year in the long run. The company is still a long way from that, and is likely to deliver around 500,000 vehicles this year.

Ambitious forecasts

Musk has often made ambitious predictions that he then failed to adhere to. Several of Tesla’s models came out with a significant delay. Last year, he predicted that Tesla would have a fleet of one million self-driving taxis on the road by the end of 2020, which from today’s perspective is unlikely to be achievable.

In the future, Tesla also wants to manufacture its batteries at the German plant in Grünheide, which is due to go into operation next year. Musk said Tuesday that Tesla was making “rapid progress” in building the manufacturing facility.

“Battery Day” took place after the annual shareholders’ meeting. Because of the Corona crisis, the setting was unusual. There was an audience, but the visitors were all seated in Tesla vehicles that stood in front of the stage, much like a drive-in theater. As a sign of applause, the horn was often honked when Musk said something.

Tesla is one of the biggest winners on the stock market this year. The share price has more than quintupled, and a share split was recently announced. The company now has a market capitalization of nearly $ 400 billion and is by far the highest-rated automaker in the world, though its unit sales have so far been well below that of many of its competitors. The good development on the stock market has to do with the fact that Tesla’s financial position has stabilized. After years of losses, the company has now posted net earnings for four quarters in a row. However, emission points that Tesla receives from governments for the production of electric cars and can resell have made a significant contribution to profitability.