Tesla disappoints investors with big 'reveal'

By Graeme Roberts | 23 September 2020

Investors reportedly cut US$50bn from Tesla market value on Tuesday despite CEO Elon Musk's promise to cut electric vehicle costs so much a US$25,000 car that drives itself would be possible, but not for at least three years.

Reuters reported Tesla's market cap dropped $20bn in just two hours after trading closed Tuesday, as Musk and other Tesla executives presented their new battery and manufacturing strategies. Shares closed down 5.6% and dropped another 6.9% after hours.

"Nothing Musk discussed about batteries is a done deal," Roth Capital Partners analyst Craig Irwin told Reuters. "There was nothing tangible."

Investors were disappointed when two expected significant announcements - the development of a 'million mile' battery good for 10 years or more, and a specific cost reduction target, expressed in dollars per kilowatt-hour, which would finally drop the price of an electric vehicle below that of a petrol car - were not made, Reuters noted.

Instead, Musk promised over the next several years to slash battery costs in half with new technology and processes and deliver an "affordable" electric car.

"In three years . . . we can do a $25,000 car that will be basically on par (with), maybe slightly better than, a comparable gasoline car," Musk reportedly said.

Reuters noted Musk acknowledged Tesla did not have its ambitious new vehicle and battery designs and manufacturing processes fully complete - it has frequently missed production targets set by Musk.

To help drive down vehicle cost, Musk described a new generation of batteries that will be more powerful, longer lasting and half as expensive than the company's current cells.

New, larger cylindrical cells will provide five times more energy, six times more power and far greater driving range, Musk said, adding that full production is about three years away.

Tesla planned to recycle battery cells at its Nevada gigafactory while reducing cobalt - one of the most expensive battery materials - to virtually zero. It also plans to manufacture its own battery cells at several highly automated factories around the world.

Reuters noted shares in two Tesla battery suppliers, LG Chem and Panasonic, fell after the announcement.

The report said Tesla would produce the new battery cells initially on a new assembly line near its vehicle plant in Fremont, California, with planned output reaching 10 gigawatt hours a year by the end of 2021. Tesla and Panasonic now have production capacity of around 35 gWh at the Nevada gigafactory.

Reuters said Tesla aims to rapidly ramp up battery production over the next years, to three terawatt-hours a year, or 3,000 gigawatt-hours or roughly 85 times greater than the capacity of the Nevada plant. Musk also said Tesla could supply batteries to other companies.