Tesla's New Battery Agreement Suggests Massive Sales Increase

By Rob Enderle October 31, 2013

Things are going well for Tesla and its battery partner Panasonic. The recent Tesla Fire investigation has concluded with no problems found for Tesla, which supports Tesla’s argument that the battery package performed as designed the problems resulted from the fire department punching holes in it. Car chargers, particularly the Tesla Superchargers, are going in as planned building out Tesla’s charging base and this week Tesla massively upped their contract.  Let’s look at this contract.

80,000 Car Deal

Tesla is in track to double production by the end of 2014 and it was clear that their existing contract with Panasonic wouldn’t supply near enough batteries.   They have their new Model X coming (I got a chance to see one the other day and it is amazing) which uses the largest battery pack they’ll make (7,000 cells) coming to market in a few months (they are accepting pre-orders) and their Model S is selling extremely well.  

The original Panasonic contract suggested a total build rate of 80,000 cars over the next four years, the new contract suggests they are expecting to be able to sell 100,000 cars in the last yet of the agreement alone this is around five times the number of cars they are now expected to sell this year.  

While this contract doesn’t assure demand will be that high it isn’t limited if demand exceeds these estimates either and the company is expected to release a lower cost sedan, the Model E in two years and they have indicated that there is another sports car in the works as well, which could arrive around the same time.   

The lower cost Sedan is expected to cost well under $40,000 or less than half of what most now pay for a Model S and smaller is better for a technology that is best in traffic and for city commutes so demand for the new E could massively exceed the demand that currently exists for the Model S.   This could easily cause sales that exceed the 100,000 total number mentioned above.   

Batteries Up the Wazoo or Not

One other technology that Tesla is introducing, Fast Swapped batteries, could significantly increase the batteries per car.  This was demonstrated a few weeks ago, a Tesla S drives into a battery swap station and a robotic system takes over removing and replacing the battery pack under the car with a fully charged one in less time than it would normally take to file up a comparable car with gas.  While locating a lot of these stations and properly stocking them with batteries will initially be rather problematic and the fee for the swap will be more in line with a tank of gas, locating these on long commute routes would vastly improve the comfort level for people driving cars that are in a rush can’t wait the 30 minutes it would take to Super Charge their batteries to 80 percent.  

However there is a substantial amount of work going into super capacitors at the moment and recent breakthroughs indicate that batteries could largely become obsolete in 10 years. Super Capacitors can charge near instantly, should outlast batteries, and approach a similar energy to weight capacity when mature. Cost should also be in line or cheaper than batteries at that time.   

Wrapping Up: Tesla is on Fire

And it is a good thing, Tesla is well ahead of projections for car sales and the big automakers are clearly worried because they are working behind the scenes to do to Tesla what they did to Tucker years ago.   They are trying to block Tesla’s store front sales approach for one but given Tesla is largely using new technology and there is far more oversight on corporate behavior now then there was last century Tesla appears to be plowing through their attempts to kill the company. Tesla is on fire and it’s a good thing.    




Edited by Alisen Downey

President and Principal Analyst, Enderle Group

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