Tesla (TSLA) Margins Could Be Supercharged By Battery Day Breakthroughs

Featured Image Credit: Tony Webster/Flickr [CC BY 2.0]

Tesla (TSLA) could increase its margins after announcing its breakthroughs in battery technology during Battery Investor Day, set this coming September.

One of the announcements Tesla might make during Battery Investor Day could be the introduction of its lithium iron phosphate battery, which could drive production costs down for the EV automaker and increase its automotive margins.

Recently Forbes reported that Tesla has been working with Dalhousie University in Canada to develop LFP batteries. The media outlet calculated that Tesla’s battery packs could cost below US$80kWh, far lower than the US$130kWh it predicted the EV automaker’s batteries would cost in 2019. It calculated that Tesla could cut over US$3,000 for each vehicle with 70kWh batteries.

Tesla Batteries' Key To Rapidly Charging High-Energy Cells Observed By Maxwell Research Partner & Her Colleagues https://t.co/GJMHTAkC0w pic.twitter.com/50rRSNPRXy

— Tesmanian.com (@Tesmanian_com) July 29, 2020

Earlier this year, news broke that Chinese battery manufacturer, Contemporary Amperex Technology (CATL) would supply Tesla with cobalt-free lithium iron phosphate (LFP) batteries. As discussed in a previous Tesmanian article, Tesla would benefit from using LFP batteries in two ways: 1) no cobalt and 2) cell-to-pack technology.

Tesla has been reducing the amount of cobalt it uses in its vehicles for years because it can be very expensive and mired in mining controversy. Removing the problematic mineral from Tesla batteries could reduce the overall cost of producing them.

Benchmark Minerals’ Simon Moores calculated how much Tesla could save in costs if Giga Shanghai were to use CATL’s LFP batteries.

“[Benchmark Minerals’] data is showing that Tesla will save up to 60% on cathode cost by using LFP in China-made-and-sold Model 3,” said Moores. He added that LFP batteries and CATL’s prismatic cells-to-pack innovation could roughly translate into mid-to-low 20% savings in total production costs.

With LFP batteries and Tesla’s drive for efficiency, the company’s margins might improve. The only question would be when will margins improve significantly. Tesla’s Battery Day could significantly affect the company’s margins or it might have started already, given the recent price reductions of the S3XY line.