After a long history of bears pulling down its stock price, Tesla Inc TSLA is now witnessing an astonishing surge in its market value. Since the start of this year, Tesla's stocks have risen by roughly 85%, crushing estimates and stunning market analysts. This performance is partially due to Tesla beating analysts' expectations on Q4 2019, reporting $7.4 billion in revenue — a 17.5% jump from the previous quarter.
At the heart of Tesla's auto ambitions is the electric battery, the energy source for all its vehicles, and a technology with endless possibilities to improve upon. In the context of electric batteries, there are two distinct factors at play — energy efficiency and production costs.
With Tesla increasingly being seen as a technology company rather than an auto company, it is surprising that the company has stayed away from improving on the efficiency of electric batteries, choosing to outsource its battery requirements to Panasonic. Nonetheless, outsourcing batteries has been a norm within the electric vehicle segment. For instance, Daimler gets its batteries from Chinese supplier CATL, while Samsung supplies batteries to the Volvo Group.
But as relations have soured with Panasonic, there have been multiple reports of Tesla mulling the manufacturing of its own batteries, with Musk hinting at that during the company's shareholders meeting last July.
A few months before this meeting, Tesla had acquired California-based supercapacitor maker Maxwell for $288 million, which will help bolster its efforts toward developing battery technology in house. In October, Tesla acquired Canadian battery manufacturer Hibar Systems, further reinforcing its bid to manufacture its own batteries.
A recent report from Electrek said Tesla is building a battery cell pilot production line in its Fremont, California, plant. New job listings have come up in Tesla's employment portal highlighting responsibilities that include the need to "drive design, commissioning ramp-up of a complex manufacturing tool that is the first of its kind at Tesla" to manufacture battery cells.
For Tesla, arguably the biggest proponent of electric cars in the world, dependence on Panasonic for its battery needs was a chink in its armor that it has longed to rectify. Tesla's relationship with Panasonic continued to strain over the years as the Japanese technology company with its austere business practices could not adapt to the brash business decisions that Musk was infamous for.
Musk had vented about the apparent disconnect during one of the investor meetings in January 2019, mentioning that Tesla was "cell-starved for vehicle production." Panasonic, operating production lines in Tesla's Nevada Gigafactory, could not supply batteries at the rate that Musk expected them to, slowing down vehicle production output.
Although Musk has maintained that the relationship with Panasonic had not broken down, Tesla's ambitious acquisitions did paint a different picture. That said, Tesla did attempt to develop its own batteries several years before the launch of Model S but ended up discarding the project as it proved too expensive.
However, with renewed vigor and the newly made acquisitions under its belt, Tesla might finally have the resources to succeed in closing the loop on its vehicle production. Success at the pilot battery production line at Fremont would inevitably lead Tesla to announce its transition from being an assembler of electric batteries to producing them en masse on its own. Apart from increasing control over its vehicle production, it also would lead to a decrease in unit costs — possibly reducing on-road prices of Tesla vehicles.
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