October 29, 2020

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    Shares of Asian battery suppliers dropped on Wednesday after Tesla Inc outlined a strategy to halve the cost of its electric vehicle batteries and increase the production of the major auto component in-house.

    The fortunes of battery makers in South Korea, Japan, and China are associated with Tesla, the EV market leader, as they provide its factories located in Nevada and Shanghai.

    Tesla CEO Elon Musk said on Tuesday the automaker intends to drive down vehicle expenses by producing a new generation of batteries that will be more powerful, longer-lasting, and half as costly as the company’s current cells.

    Musk acknowledged that Tesla does not have its forceful battery designs and manufacturing processes entirely complete — disappointing investors and wiping $50 billion off its market value — but experts said strategies for in house production would increase pressure on suppliers to decrease prices.

    “Tesla will have more power in negotiating prices and therefore overall battery costs will fall further,” stated Rho Woo-ho, an analyst at Meritz Securities.

    Shares in South Korea’s LG Chem dropped 2.2% while Panasonic dropped 4% and China’s CATL dropped 2.8% in afternoon trading.

    A Panasonic spokeswoman said the company is thinking about “a variety of options” when asked if the company would partner with Tesla on new cell production but added that nothing has been figured out at this time.

    “We value our relationship with Tesla and look forward to enhancing our partnership,” the company said.

    LG Chem refused to comment. A source familiar with the company said it is open to working with Tesla on the new batteries.

    CATL said in a statement it also prepared research and investment in nickel rich chemistry, large cells, and integrated structure, which are part of Tesla’s technology development roadmap, and observed them as major factors in making electric vehicles mainstream.

    Tesla said it plans to get 100 gigawatt-hours of internal battery capacity in 2022 and 3,000 gigawatt-hours by 2030 — approximately 85 times greater than the capacity of its Nevada plant by 2030.

    “This 100 gigawatt hours are supplemental to what we purchase from suppliers,” Musk said, reiterating that Tesla will keep using its existing cell suppliers.

    Tesla currently produces batteries in collaboration with Panasonic at its Nevada factory, while LG Chem and CATL provide cells to its Shanghai factory.

    Tesla said it has started increasing production of its new batteries at a pilot line close to its vehicle plant in Fremont, California, but the production yield is not high.

    “It is insanely difficult to scale up,” Musk stated at the company’s closely watched “Battery Day” presentation.

    Tesla

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