Tesla is Secretly Planning to Develop its Own Battery Cells

Tesla is working on developing its own battery cells in an effort to loosen its relationship with Panasonic a report from CNBC suggests. The electric car company has relied on Panasonic to provide battery cells since the two companies teamed up in 2014.

Sources close to Tesla told CNBC that achieving production in-house could help slash the price of Tesla vehicles and other battery related products. The battery packs and battery cells are one of the largest cost components in an electric vehicle.

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Reduce battery constraints

At the recent Tesla share holder meeting, CEO of Tesla, Elon Musk, admitted that at times the company had been “battery-constrained”. This means that the company had to limit the production and sales of electric vehicles and energy storage systems (Powerwalls and Powerpacks) due to lack of battery availability.

Tesla has a long term vision to be as vertically integrated as possible.

For Tesla, this means looking to produce as much of its required components inside the company. Whether Tesla can actually achieve the goal of developing and manufacturing its own batteries remains to be seen.

Secret lab

The setup costs for such an operation would be huge and the company is already struggling to figure out the best business model to achieve its ambitious targets.

According to the CNBC report, the R&D for the battery manufacturing is carried out at a “skunkworks lab” at the company’s Kato Road facility, close to the company's car plant in Fremont, California. Model 3, Model S and Model X are produced at this factory.

Tesla needs Panasonic in China

The car's battery packs are made at the Gigafactory in Sparks, Nevada, a facility jointly owned and operated with Panasonic. The secret Tesla R&D teams have reportedly been tasked with designing and prototyping advanced lithium-ion battery cells.

In addition to developing the batteries, Tesla is working on ways to produce these batteries in high volumes, former Tesla employees told the media outlet.

This report is backed up by several job advertisements by Tesla looking for various engineers involved in battery cell design, equipment for producing battery cells and manufacturing processes to make batteries.

Even if Tesla does achieve these ambitious goals, it would be surprising if the company halted its relationship with Panasonic.

As Tesla continues to ramp up production of the Model 3 in Shanghai, they will need to rely on Panasonic and other battery suppliers to supply products for these cars.

The Shanghai factory is expected to launch production later this year or early 2020. Musk hinted at exciting new possibilities related to battery production during the recent shareholder meeting.

Self-driving cars and battery production

The South African entrepreneur asked investors to focus their minds on two matters close to the Tesla vision.

First, delivering completely self-driving vehicles, and second, the company's plan to “scale battery production and get the cost per kilowatt hour lower.”

Musk suggested the company's recent acquisition of Maxwell Technologies, will play a large part in this second goal.