Tesla-Wrong Choice of Battery?

Tesla may be investing in the wrong type of battery and could stand to lose billions of US Dollars.
Published: Thu 01 May 2014

The motor vehicle industry is not raising its eyebrows at Tesla Motors’ plans to build the world’s largest battery factory at a cost of US$5 billion-it’s Tesla’s choice of battery that is creating a stir. [Engerati:Will Tesla’s Gigafactory Crack the Energy Storage Market?]

The market for the 18/650 cell, a cylindrical battery which measures 18 mm wide and 65 mm in height, is on a steady decline.

The shift to flat cells

Tesla is the primary buyer of this format, along with laptop makers. Tesla uses 8,000 such cells, specially formatted with its own unique chemistry, to provide the energy to its 85 kWh Model S.

Other car manufacturers across the US are using much larger and fewer batteries for their vehicles. The high-power batteries are receiving government subsidies and are operating well below full capacity.

Although Tesla has been able to reduce its costs, car manufacturers are not following Tesla’s lead. The reason for this is that battery experts predict that larger cells will eventually prove to be as cost effective as the smaller cylindrical batteries. They will be safer to use and will be more durable than the cylindrical cell.

Already, flat cells are replacing cylindrical 18/650 cells in consumer electronics such as tablets, smart phones and thin laptops.

As the world shifts to flat cells, the installed capacity to make cylindrical cells is underutilized in Korea, China and Japan by companies other than Panasonic Corp., Tesla’s partner.

Cylindrical cell market on a decline

Industry experts such as Prabhakar Patil, the chief executive officer LG Chem Power Inc., a battery research division of Korean electronics giant LG Corp., question whether battery industry suppliers will want to invest in the Tesla’s choice of battery: “The market for cylindrical cells is on a decline, and all of the other (automakers) are going for the larger format batteries for vehicle applications, so this type of demand becomes driven by one customer, for one application.”

Dr. Menahem Anderman, President of consultants Advanced Automotive Batteries, is also not convinced that Tesla engineers will continue to architect future battery packs and EV powertrains around the small, reliable, and thermodynamically efficient 18/650: “"I don't see other OEMs going to the 18650.” He says the cost advantage Tesla realized when it first specified the 18650 cells for its original 2008 Roadster model has "eroded" compared with newly developed cylindrical, pouch, and prismatic cell configurations used across the auto industry, despite Tesla's increasing production volumes.

Tesla’s not married to cylindrical cells

This lack of demand for the cylindrical cell may mean trouble for Tesla. There are not that many customers available for the huge battery-making capacity it plans to create, other than those in the stationary solar energy storage applications business. The potential to sell batteries to Solar City Corp., where Tesla Motors Inc. Chief Executive Elon Musk is chairman, is often mentioned as the second buyer for the batteries beyond Tesla itself.

Tesla’s Chief Technology Officer, JB Straubel, has said that the company is not married to cylindrical cells and that the company would move to flat cell manufacturing if and when the technology provides greater advantages.

While this flexibility is commendable, one does wonder whether it was a good idea building a US $5 billion plant to specifically manufacture this battery type.

Further reading:

Electronics-EETimes-Cylindrical battery prices to decline by 2.8 percent in 4Q13, predicts Energy Trend