With Japanese electronics firm Panasonic occupying the prized place as Tesla Motors [NASDAQ:TSLA] chosen partner for the massive lithium-ion manufacturing and reprocessing Gigafactory it is building north of Reno, Nevada, you’d be forgiven for thinking Panasonic would be Tesla’s first (and perhaps only) choice of supplier for additional battery cells ahead of the Gigafactory’s planned 2016 completion date.
But with Panasonic already hard at work supplying Tesla with the high-power 18650 form-factor battery cells it needs to meet continually rising production volumes of the Tesla Model S and Tesla Model X electric cars, Tesla confirmed today that it has inked a new battery deal to secure battery cells for use in its recently-launched Tesla Roadster 3.0 upgrade package.
As The Wall Street Journal reported this morning, the deal is with South Korean battery specialist LG Chem Ltd, and will be exclusively to supply Tesla with the high-capacity, high-power battery cells it needs in order to offer existing Tesla Roadster owners a new battery pack upgrade to their ageing two-seat sports cars. The new battery pack, along with a specially-designed aerodynamic body kit, redesigned energy-efficient wheels, tires and brakes, forms Tesla’s new Roadster 3.0 upgrade package.
Costing a cool $29,000 all-in, the Roadster 3.0 upgrade package is said to increase total battery capacity by 40 percent over the original Tesla Roadster battery pack, and under the right conditions offer 400 miles of range on a single charge.
In addition to keeping existing owners happy in a stroke of marketing genius, the Roadster 3.0 upgrade package also means Tesla’s two seat sports car can reclaim its title as the longest-range electric car on the road today. Originally only intended to be offered to owners of the Tesla Roadster 2.0 and 2.5, Tesla announced earlier this week that it would now also offer the same upgrade path to Tesla Roadster 1.5 owners, despite significant differences between the earlier model and later cars and the additional costs associated with offering the upgrade.
With just 2,600 Tesla Roadsters built before production ended in 2012, Tesla has admitted that the Roadster 3.0 upgrade program won’t be a money-earner for the company. Indeed, with just two or three packs due to be assembled every week at Tesla’s Fremont production facility in California, volume production was never an option.
Yet until Tesla’s $5 billion, 2,000-acre Gigafactory reaches completion, Tesla’s current and predicted battery demands means that it needs to source cells wherever it can. Even when Panasonic begins churning out high-volumes of lithium-ion cells at the Gigafactory for Tesla to bring its promised mass-market, long-range, BMW 3-Series-beating $35,000 Tesla Model 3 to market, Tesla may continue to use third-party suppliers to ensure a constant supply of cells.
That’s because the Gigafactory will not only need to supply cells for the Tesla Model 3, but also Tesla’s existing Model S and Model X electric cars, as well as the Tesla Energy line of domestic and industrial energy storage products.
Unveiled earlier this year at a special event at Tesla’s Hawthorne design studio in Los Angeles interest in the domestic Tesla PowerWall and industrial-grade Tesla PowerPack was so high that Tesla CEO Elon Musk joked that things at Tesla’s new energy division were “crazy” and “off the hook.” Shortly afterwards, Tesla quietly changed its plans for the Gigafactory, purchasing additional land adjacent to its construction site and doubling the planned acreage of the finished facility from 1,000 acres to 2,000.
While Tesla’s just-inked deal, details of which haven’t yet been disclosed, will be its first with LG Chem and the first outside of its relationship with Panasonic, it’s worth remembering that LG Chem is no stranger to the electric vehicle market. Second only to Pansonic in terms of supplied volumes of automotive-grade lithium-ion cells, LG Chem already supplies lithium-ion battery packs to a large number of major automakers, including Renault, General Motors, Volvo, Volkswagen, Ford and Hyundai-Kia.
As many in the automotive industry will agree, LG Chem offers one of the best cell chemistries available today, supplying GM with the high-density, high-power battery pack it needs to bring its 200-mile 2017 Chevrolet Bolt EV to production. Indeed, LG Chem’s battery packs are so impressive that Nissan is rumored to be ditching its existing joint battery partnership with NEC under the Automotive Electrical Supply Company name in order to use LG Chem’s battery packs in its second-generation 200+ mile LEAF.
Finally, we’d like to reassure those worrying that news of the new deal between LG Chem and Tesla means something is wrong between Tesla and Panasonic. While it’s a fair enough assumption to make given Tesla’s long-standing agreements with Panasonic, we’d like to dispel any such thoughts by reminding readers that while LG Chem is only other battery supplier to finalise a deal with Tesla, it’s certainly not the first to be considered as a battery supplier.
A few years ago, Samsung SDI was rumored to be in talks with Tesla to supply it with 18650 cells to supplement the cells being supplied by Panasonic. While that deal didn’t become reality, Tesla’s Elon Musk disclosed shortly after the rumor became public knowledge during a conference call that Tesla has been in talks with pretty much every battery cell manufacturer.
In short, Tesla sources the best cells it can from the best manufacturers it can. Eventually, it will produce a large volume of the cells it needs with its partners at Gigafactory facilities around the world. For now though, Tesla needs every spare cell it can get.
And that could have an interesting impact on the cost of lithium-ion cells around the world.
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