Elec­tric car bat­tery plan will be profitable from lower sales: Tesla

The Pak Banker - - Company& -

LOS AN­GLES: Tesla Mo­tors Inc., the elec­tric car­maker backed by Toy­ota Mo­tor Corp., said cheaper bat­ter­ies will make its Model S sedan profitable with much lower sales than Nis­san Mo­tor Co. is seek­ing for its Leaf car.

The $57,000 elec­tric Model S, which uses cells sim­i­lar to those in lap­tops, is de­signed to make money for Palo Alto, Cal­i­for­nia-based Tesla at 20,000 an­nual de­liv­er­ies, Chief Technology Of­fi­cer J.B. Straubel said in an in­ter­view. Nis­san Chief Ex­ec­u­tive Of­fi­cer Car­los Ghosn has said com­bined bat­tery-car sales for Nis­san and af­fil­i­ate Re­nault SA may need to reach 500,000 ve­hi­cles a year to be profitable with­out govern­ment aid.

Nis­san's choice of a larger type of lithium-ion bat­tery means "they will have a cost chal­lenge that will be more dif­fi­cult to solve," Straubel said yes­ter­day in an in­ter­view. "It will re­quire a lot higher vol­ume be­fore they re­ally get to a cost point that is in­ter­nally sus­tain­able."

Tesla, which has yet to post an an­nual profit, has de­liv­ered $109,000 recharge­able Road­sters since 2008, pow­ered by thou­sands of small lithium-ion cells sim­i­lar to those used in por­ta­ble com­put­ers. The Sil­i­con Val­ley startup says such cells, supplied by Pana­sonic Corp. and other man­u­fac­tur­ers, will re­main more cost-ef­fec­tive for the fore­see­able fu­ture than the larger lithium bat­ter­ies in the Leaf and Gen­eral Mo­tors Co.'s $41,000 plug-in Volt, which both went on sale this month.

Tesla's bat­tery packs may cost as lit­tle as $200 per kilo- watt hour, com­pared with about $700 to $800 per kilo­watt hour for so-called large­form cell lithium-ion packs, Martin Eber­hard, a Tesla founder and for­mer chief ex­ec­u­tive, said in an in­ter­view last month. Straubel de­clined to con­firm Eber­hard's es­ti­mate or dis­cuss the cost of Tesla's bat­tery packs.

Nis­san's elec­tric ve­hi­cle strat­egy can't re­ally be com­pared with that of Tesla, said David Reuter, a spokesman for the Yoko­hama, Ja­pan-based com­pany's North Amer­i­can unit. He didn't elab­o­rate.

"The Nis­san Leaf prod­uct pro­gram will be profitable over its life­cy­cle," Reuter said. He de­clined to say how long the prod­uct cy­cle would be for the $32,780 Leaf.

The com­pany has been de­vel­op­ing its lithium-ion bat- tery technology over the past two decades, "so a lot of the in­vest­ment has al­ready been amor­tized through many years," Reuter said.

Nis­san fell 1 per­cent to 777 yen as of the 11 a.m. trad­ing break in Tokyo. The stock has de­clined 4.1 per­cent in 2010. Tesla rose $1.32, or 5 per­cent, yes­ter­day to $27.73 in Nas­daq Stock Mar­ket trad­ing in New York. The shares have surged 63 per­cent since they be­gan trad­ing on June 28.

Tesla's Straubel con­ceded the Model S's higher price will make it eas­ier to turn a profit with fewer de­liv­er­ies af­ter it goes on sale in 2012. Still, cheaper bat­ter­ies are the main rea­son, he said.

Tesla's chal­lenge is to en­sure a high level of qual­ity con­trol in its bat­tery pack and assem­bly pro­cesses as it tries to ex­pand from sup­ply­ing about 1,000 Road­sters a year to mak­ing 20,000 or more of the Model S, said Brett Smith, who spe­cial­izes in al­ter­na­tive propul­sion ve­hi­cles at the Cen­ter for Au­to­mo­tive Re­search in Ann Ar­bor, Michi­gan.

"There's a method to their mad­ness," Smith said. "Tesla is us­ing cells that, while not ex­actly the same as those in lap­tops, can be made on ex­ist­ing lines that al­ready masspro­duce them."

As a re­sult, Tesla didn't have to spend as much for bat­tery re­search and devel­op­ment and lithium-ion cell pro­duc­tion, Smith said. "Es­pe­cially for a small man­u­fac­turer, there's a logic to what they're do­ing," Smith said. In a sep­a­rate news item, DP World Ltd. -Cour­tesy Bloomberg

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