Investors thought Tesla ’Battery Day’ was disappointing, but was it?

Highlights of the ‘Battery Day’

Elon Musk started with the classic hype over Tesla achievements and that he believed in self-driving technology although he was been too positive before. He also talked about the difficulties of ramping up production of EV prototypes and sometimes it is related to software as in the case of Volkswagens ID.3. Nikola is another case of where the company has still not moved from prototype to actual production.

Musk also talked a lot about solar as an important secondary segment for the company and that the production volume would mean that Tesla what from now on communicate in terms of TWh instead of GWh. Besides solar energy storage was also emphasized in relation to a transition to a less carbon intensive society. Our view is that the energy business of Tesla is the least appreciated by investors but in fact holds the potential to lift the operating margins over time.

He introduced a new cell design called 4680 which is good improvement over the old design and will allow for 16% more range. It uses a tabless design which simplifies manufacturing and reduces overheating when being supercharged. There had been a lot of speculation about dry electrode method before the ‘Battery Day´ but the technology is not ready although Tesla indicated that they could get it to work. More promises as investors are used to by now.

On the chemistry side a few things were announced. It will continue to use lithium and expect it to better than what graphite can achieve, and Tesla will begin to use raw silicon adding a special coating which again will improve range. The cathode will be nickel going forward removing cobalt from the equation and thus allowing the industry to distancing itself from the horrible cobalt mining conditions of today.

Finally, Tesla announced that it will begin recycling in-house at the Gigafactory in Nevada allowing new batteries to build from old battery material. Overall, many small improvements that multiple over the years will make a difference in the competition against the other carmakers. But in the short-term we believe investors were disappointed and focus will be back on deliveries, and not to forget uptake in its energy business.