Tesla Motors - Model S lithium-ion battery pack
He said he had "no interest in an article that debates what we consider to be an obvious point -- which is that there is a dramatic reduction in battery costs," then went on to tell the reporter, "You clearly do not understand the business," before apologizing and ending the interview.
The resulting Barron's story argued that Tesla's stock price was overvalued, because the lithium-ion cells used to power Tesla's vehicles cost a great deal.
Reading the story, it becomes clear that the author believes Tesla has to spend $400 per kilowatt-hour to build the battery pack for its Model S electric luxury sport sedan.
The figure is widely cited by journalists who write about Tesla--The New York Times last year, for instance.
This "price" may come from the $10,000 price difference between the 60-kWh and 85-kWh versions of the Model S, since $10,000 divided by 25 kWh produces a per-kWh figure of $400.
Quick market test
To test that notion, I contacted one wholesaler and offered to purchase a small number of the '18650' lithium-ion cells Tesla uses in its packs.
That company offered to sell them to me at a price of roughly $350 per kWh, including the attached circuit boards used to group battery cells into larger assemblies, which can retail for almost $4 each.
Considering the small number of cells, and the free offer of attached (or unattached, my choice) circuit boards, it seems clear Tesla's price in great volume could be much lower.
Nevertheless, the $400-per-kWh "price" seems to have been widely accepted without further inquiry--perhaps because it is still much less than what competing automakers appear to be paying.
2013 Tesla Model S
Tesla: thousands of cells
Unlike automotive cells, these cells are produced in the billions, subject to the fierce competitive pressures that are a signature characteristic of the computer and consumer electronics industries.
Even including the overhead of the pack enclosure, connections between cells in modules (and modules in the pack), sensors, and circuitry, Tesla likely has lower pack costs than any other maker of plug-in electric cars.
Simplifying a cheap cell
But for the Model S, Tesla redesigned what was already a relatively simple cell to be much less complex, and to have a much lower manufacturing cost--largely by removing expensive safety systems built into each individual cell.
When used as a laptop battery, each cells requires a safety mechanisms to prevent fires. But in a large, electronically-controlled, liquid-cooled battery pack like the one used in the Tesla Model S, having certain safety features on each cell would be redundant.
2012 Tesla Model S body-in-white
In this case, the company's cell design eliminates the relatively complicated battery cap of the commercial cell, and replaces it with a simple aluminum disk.
Having radically simplified the cells, Tesla then designed simple and inexpensive fireproofing systems into its battery pack. Among many innovations, Tesla appears to have incorporated a form of intumescent goo that it sprays onto the interior of the pack to aid in fireproofing.
When exposed to heat, a chemical reaction occurs in the goo that helps cool the heat source, while simultaneously forming a fireproof barrier to protect the rest of the pack.
In testing by Tesla, this material often cooled cells experiencing a runaway reaction--to the point that many failed to ignite at all--and provided a fireproof barrier surrounding those that ignited.
The potential safety advantages of Tesla's small-cell approach were highlighted during the Boeing Dreamliner battery-fire fracas.
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Thus far, Tesla has never experienced a battery fire in a production pack.
Tesla's price advantage
But even without the simplified design Tesla created, the standard Panasonic NCR18650A 3100mAh cells that Tesla uses probably don't come close to costing it $400 per kWh.
Panasonic is an investor in Tesla Motors, so there could be an incentive to work hard on lowering the price for specially-developed cells to a company it partially owns.
Yet that's the price that prestigious consulting firm McKinsey suggests will be reached in 2020 by the industry at large.