Elon Musk is reportedly looking to slash Tesla's reliance on Panasonic.
2 min read
There is no doubt that Elon Musk is a visionary man with ambitions that may or may not materialize in the long run. The Tesla CEO has his hands full with ventures in space, on Earth, and even below the ground. Now it looks like he is on his way to add another feather to his cap: batteries.
Tesla has a secret lab trying to build its own battery cells to reduce dependence on Panasonic httpss://t.co/XceaOTEqGX
— CNBC (@CNBC) June 26, 2019
CNBC reports that Tesla is secretly developing its own batteries in a bid to reduce its reliance on Panasonic. According to nearly half-a-dozen Tesla employees (both current and former) who were interviewed by CNBC, the electric vehicle maker reportedly runs a secret lab close to its Fremont, Calif. plant where it conducts battery-related research.
Elon Musk thinks Tesla needs battery tech
Elon Musk is upbeat about Tesla’s prospects. He has promised that the company could deliver a record Q2 on “every level” and also boasts that 90% of orders are coming from new customers.
This may have given Musk the encouragement to move forward with his own battery manufacturing facility. After all, the Tesla CEO pointed out at the June shareholder meeting that it has faced a shortage of batteries.
This is why Elon Musk needs to find a way to make batteries in big volumes to meet Tesla’s ambitious sales goals. According to the CNBC report, Tesla is trying to do just that. The interviewed employees revealed that the battery research team is developing advanced battery cells – along with new processes and equipment – in a bid to increase volumes.
Given that Musk is now planning to add another affordable model to the Tesla lineup, it makes sense for the company to work on its own battery tech to boost volumes and reduce costs through vertical integration.
Tesla CEO Elon Musk said 2019 would bring an affordable electric car built in a new factory in China. But as @timkhiggins reports, investors may be losing confidence in that plan. pic.twitter.com/TrtUuyxxis
— The Wall Street Journal (@WSJ) June 26, 2019
The bad news, however, is that Musk might be overestimating demand for Tesla cars, so his battery venture could end up falling flat on its face.
Is Musk being too optimistic?
Elon Musk plans on delivering between 90,000 and 100,000 vehicles in Q2. The midpoint of that guidance would translate into record deliveries for Tesla.
But the Q2 numbers will be inflated by undelivered cars from the previous quarter when the company was reportedly facing logistics issues. Despite that, analysts believe that Tesla will miss its ambitious Q2 target. That won’t be something new for Elon Musk and Tesla.
— Tom Randall (@tsrandall) April 4, 2019
And even if it does manage to move 90,000 vehicles in Q2, Tesla will need to deliver more than 200,000 vehicles in the second half of the year to meet the lower end of its target of 360,000-400,000 deliveries.
Analysts believe that demand for the company’s cars is weak, and there are no major catalysts in sight that could boost sales.
So Tesla’s move to make its own batteries might backfire if sales don’t pick up, leaving Elon Musk with a project that would be dead in the water despite his optimism.