Tesla's Battery Day and Why Investors Were Left Disappointed
Updated: Oct 2, 2020
Tesla’s long-awaited 'battery day' finally took place on the 22nd of September. This was Elon Musk’s chance to reveal battery breakthroughs and cement Tesla's position at the top of the electric vehicle (EV) market.
Battery day had been widely anticipated on wall street. Investors expected the unveiling of a revolutionary new technology that could lead to a million-mile battery as well as the announcement of the Model S Plaid being ready for purchase.
Unfortunately for Tesla’s share price, neither of these predictions came true. We did see some innovation in battery technologies. In that Tesla will no longer be using cobalt as a core component to their batteries, favouring a nickel design instead.
This breakthrough will provide a cost saving and is a big win for environmental activists. However, this was not a win for Tesla in the eyes of investors as competitors already boast cobalt-free batteries. As for the Model S Plaid, Tesla released its first official footage of the car in action but disappointed investors by announcing it won’t be ready for purchase until late 2021.
Tesla bears saw this as yet another example of the firm not meeting its prescribed deadlines; a pattern which is familiar to Tesla fans. However, there were some big reveals made, the most critical being a series of manufacturing improvements expected to reduce the cost of battery manufacturing by 56%.
Tesla announced its plan to upscale its battery manufacturing capabilities taking inspiration from the continuous production processes seen in bottling plants and paper mills. Elon Musk also announced the successful integration of Maxwell Technologies whom they acquired in 2019 — showing further advancement in their vertical integration process. Tesla now owns almost every element of its production process, even including undug lithium deposits in the Nevada Desert. These announcements have given bulls faith there is a clear path for Tesla to dominate the industry for at least the next 5-10 years.
They believe Tesla will deliver on their plan to have a terawatt factory by 2024. A move which will likely see Tesla becoming a net exporter of batteries. A contrast to its current position, reliant on importing batteries from suppliers such as Panasonic. It can be argued the proposed leaps in manufacturing capabilities outperformed expectations if they are delivered – however the market doesn’t like ifs. For the bears this is another promise based on systems not yet developed; inevitably subject to be delays.
The immediate future for Tesla is bright. This year they have managed to iron out many of their production capacity bottleneck issues; have established production capabilities in China and raised an additional $5bn in funding via stock sales. Whether Tesla can live up to its market capitalisation as the most valuable automaker on the planet is yet to be seen with VW and GM unveiling seemingly competitive cars earlier this year. But for now, the next step for Tesla fans is to look towards the Q3 earnings report on the 23rd of October.