Tesla’s Cobalt-Light Batteries Seen Providing Cost Advantage

Tesla Model 3
2018 Tesla Model 3 sedans sit on display outside a Tesla showroom in Littleton, Colo. (David Zalubowski/AP)

Tesla Inc.’s lead in battery technology gives it a cost advantage that may last for several years and help the U.S. electric-car maker face down an onslaught of new competition, according to new research from Bloomberg.

Batteries made by the U.S. manufacturer and its Japanese partner, Panasonic Corp., require less cobalt, the metal whose price has shot up with demand for electric cars. CEO Elon Musk on June 5 said Tesla is targeting a cell-level price of $100 per kilowatt-hour in 2018 and battery-pack costs below that level within two years. Bloomberg doesn’t expect average pack prices to drop below $100 until 2025.

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“If Tesla reaches its pack-price milestone, it will be several years ahead of our industry benchmark,” the report said. The researchers noted that others made batteries for as low as $120 per kWh in 2017, “which suggests that Tesla is not alone in being ahead of the curve.”

Tesla hasn’t been able to extend its U.S. dominance in electric cars to other regions, and now is under threat from new models coming from European brands such as Volkswagen, Daimler, Volvo Cars and BMW. The competition will be toughest in the SUV and crossover segment, where the Model X goes up against new models from Jaguar Land Rover’s I-Pace, Audi’s coming E-Tron and the Hyundai Kona, due in 2019.

Daimler’s Mercedes-Benz unveils its EQC crossover Sept. 4 in Stockholm, part of a plan to invest at least 10 billion euros ($11.6 billion) to develop a range of electric vehicles.



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With expanded consumer choice, competition will focus not just on the availability of electric cars, “but by more prosaic issues such as price, build quality, aftermarket services and user experience,” the report said. “If Tesla is to maintain its early leadership in the EV industry, it may have some ground to catch up in these areas against the established automakers.”

By contrast, Tesla and China’s BYD Co. are the only two vertically integrated electric-car makers, “which may confer a long-term advantage if battery technology becomes a major differentiator,” the report said.

BYD is the leader in global electric-car sales, with 9.9% of the market, according to Bloomberg. Tesla is just behind at 9.7%.

Results are mixed in other areas. Tesla is improving production of the Model 3, and its products will still stand out through 2020, Bloomberg said. The company will need significant investments in China and to develop its semi-truck, Model Y and pickup truck, the report said.

Meanwhile, delays to an upgrade of its Autopilot feature and a lack of mobility services leave it behind other carmakers, the report said. The Solar City business it acquired for $2.1 billion hasn’t lived up to expectations.