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On Tuesday, Tesla Inc.’s market value dropped by $50 billion after Elon Musk’s announcement regarding a cheaper battery. Musk, in his statement, promised that the cost of electric vehicles will be cut so that a car costing $25,000 that can drive itself will be a possibility. Musk mentioned that this will be possible, but not for the next three years at least.
In just two hours after the close of trading, Tesla’s market cap dropped $20 billion. This happened as Tesla executives, along with Musk, presented their manufacturing strategies and new battery. Shares closed at 5.6% and further dropped 6.9%. According to Craig Irwin, an analyst at Roth Capital Partners, nothing tangible was discussed about the batteries.
Two important announcements were expected at Musk’s “Battery Day”. One is the development of a battery that will work for 10 years or more, termed as the “million-mile” battery. The second was a cost reduction target, which would be in terms of dollars per kilowatt-hour. This would further reduce the price of an electric vehicle below that of a fuel-run car.
Instead of the above two announcements, Musk promised to cut down the cost of batteries in half in the coming years with the aid of new technology and processes. This would help in delivering an affordable electric car. Addressing an online audience of around 270,000, Musk said that building an affordable electric car has always been the company’s dream. He also acknowledged that Tesla does not have vehicle designs, battery designs, or manufacturing processes complete as of now. Tesla aims to be able to build around 20 million electric vehicles a year.
Tesla announced a new Model S Plaid, a sedan with a 520-mile range that can reach a speed of 200 miles per hour. This model was listed on the Tesla site at $140,000.
During his event, Musk explained about a new generation of batteries that would be more powerful than, but half as expensive as the current cells. The new larger cells, cylindrical in shape, will have six times more power, five times more energy, and a greater driving range. Musk mentioned that Tesla will recycle batteries at its Nevada factory to help reduce costs. He mentioned their plan to reduce cobalt to almost zero; cobalt is one of the most expensive materials in batteries. He mentioned the company’s plan to manufacture its cells at automated factories all over.
It was mentioned that the new battery cells will first be produced on a new assembly line near Tesla’s vehicle plant in Fremont. The plan is to reach an output of 10 gigawatt-hours per year by the end of 2021. The company plans to increase production quickly to produce 3 terawatt-hours or 3,000 gigawatt-hours per year.
With an increasing need to shift to kilowatts, investors are looking for proof that Tesla can lead in the field of electrification technology. Electric cars still cost more than a conventional fuel-run car. According to research, equality of price will be attained when battery packs cost around $100 per kWh. As of 2019, Tesla’s battery pack costs $156 per kWh.