Tesla's new battery tech is bad for other carmakers but good for the Earth

Fortunately, though, rivals have got some time to react as the new batteries won't arrive until 2022.

Elon Musk variously hinted that Tesla's "Battery Day" would introduce "many exciting things" and blow our minds. And, well, he wasn't totally wrong. The world's most valuable automaker today unveiled not just new battery tech that'll help Teslas go further while costing less, but which will also enable more efficient storage, and announced that it will be building these next-generation batteries itself.

Musk says, in order to create a sustainable future, the company has to reduce the cost-per-kilowatt-hour of batteries — which has been declining, but also plateauing — and that while EV market share is growing, affordability isn't improving fast enough. To fix both of those problems, Tesla plans to halve the cost-per-kWh of it's batteries when compared to existing batteries.

How it's going to do it — First, the company has undertaken extensive research to find the sweet spot in battery-cell size that removes the thermal challenges of bigger batteries and also allows them to be more cost-effectively made. It's also removed the tab found on existing batteries that's traditionally connected to the parts that need power. Instead, Tesla's tabless batteries use a shingled spiral that not only makes for simpler manufacturing but boasts a better power-to-weight ratio than existing batteries.

The new form factor alone allows for 5x the energy, a 16 percent range increase, and 6x the power of Tesla's existing 2170 batteries. Musk warns that it'll take around a year for the company to reach full production capacity, but that the factory systems it's building will be the most efficient in the world.

"Tesla is aiming to be the best at manufacturing of any company on earth," Musk says, adding that he sees this as ultimately, one of the key things that'll keep Tesla ahead of its rivals, all of whom will eventually offer electric vehicles, but not all of whom are likely to be able to match Tesla for vertical integration and the efficiencies that come from it.

Tesla's new "shingled spiral" tabless battery.Tesla

New materials — Not content to merely rethink battery manufacturing, Tesla is also changing the material composition of batteries. While silicon is already used in contemporary batteries, it's expensive, and current solutions have battery-life limitations. Instead, Tesla will use "raw metallurgical silicon" in its batteries, which it says on its own increases range by 20 percent.

It's also making cathode production facilities in the U.S. that'll cut out intermediate stages usually required in turning nickel and lithium into batteries. That won't only drop costs, but make batteries easier to recycle.

Finally, because the company is making custom batteries, it can pack them side by side, removing empty space between them, and centering them more in the car, which is good for both safety and handling. Custom front and rear portions of future Tesla's that are now being cast as single pieces also mean the batteries are now a structural element of the vehicles, not merely cargo.

The combined benefits of Tesla's new battery technology.Tesla

The "million-mile battery" — Tesla had been expected to unveil what's been dubbed a "million-mile battery," which would lower the total cost of ownership of a Tesla while also making for cheaper batteries. Both of those would help Tesla bring the cost of its EVs nearer that of internal-combustion vehicles, which is seen as one of the last serious hurdles to encouraging consumers to switch from fossil-fuel-burning vehicles to electric ones.

The announcement came as part of the company's 2020 annual shareholder meeting, with attendees listening from parked Teslas that made proceedings resemble a drive-in. Rather than applauding at milestone announcements, attendees used the horns of the Teslas they were sat in. Which is the perfect sort of bombastic behavior for a Tesla event, really.

It's not the first time the electric vehicle maker has held an event dedicated to a specific topic — it previously did the same for its AutoPilot feature that provides various autonomous functions, like lane-keeping and automatic acceleration and braking on highways, and the "summon" feature that can navigate parking lots.

Managing expectations — Musk took to Twitter ahead of Battery Day to manage consumers' expectations about the announcements, tweeting: "Important note about Tesla Battery Day unveil tomorrow. This affects long-term production, especially Semi, Cybertruck & Roadster, but what we announce will not reach serious high-volume production until 2022."

In Tesla speak, that means the new technology will come in 2022 at the earliest, but likely later, because Tesla may be known for many things, but meeting its own deadlines isn't one of them.

"The hardest thing is scaling a new product. Making a prototype is easy," Musk said, adding that one of the ways to bring down costs is to have "a factory in each continent" to bring down the time it takes to turn parts into finished vehicles and ship them to buyers.

One thing Tesla is good at is building production facilities. Tesla Shanghai went from breaking ground to cars rolling off the production line in a mere 15 months. The company also has new facilities in progress in Berlin, Germany, and Austin, Texas, both of which will help it realize it's ambitions of going from producing a few hundred thousand vehicles a year as it does now, to the 20 million per year it aspires to.

No choice but to build batteries itself — Before Battery Day, there were rumors that Tesla making its own batteries would see it reduce its partnerships with Panasonic, LG and battery-specialist CATL. However, Musk tweeted that the reverse is true:

We intend to increase, not reduce battery cell purchases from Panasonic, LG & CATL (possibly other partners too). However, even with our cell suppliers going at maximum speed, we still foresee significant shortages in 2022 & beyond unless we also take action ourselves.

Tesla will continue to rely on its partners, but it needed to get into the battery game itself if it's going to meet its ambitious targets. Having the ability to produce vehicles at scale but not having sufficient batteries to power them would be disastrous for cashflow especially in a sector where margins are already slim.

"The fundamental good of Tesla will be measured by how many years we accelerated sustainable energy by," Musk said. "We're going to make a step-change improvement in the future of sustainable energy." The future is going to require efficient, affordable batteries. Today Tesla's shown it plans to build them.