Manufacturing is rapidly scaling up. There is so much lithium available in the world (even commercially reasonable to extract from the ocean), that there is much room for per unit costs to decrease before you encounter lower COGS bounds (evaporation + transportation costs).
More importantly, a ton of lithium mined will be used for decades; when all of the Model S/X/3 battery packs are end of life (10-15 years from now), those modules are going to be remanufactured into stationary storage (or recycled entirely through a destructive extraction process, depending on degradation and next use case). This is similar to how your recycled pop can might end up in the aluminum used in a new light truck or an aircraft fuselage (edit: poor example; a better example would be automotive parts that are remanufactured and put back into service).
The smartest thing Tesla ever did was finance battery manufacturing using luxury vehicle margins (stoking demand with a sexy, desirable brand), and have those customers (including myself) finance the depreciation and capital carrying costs of those battery sleds they'll use again in the future. I am not a Model S owner; I am the temporary user of 100kw of energy storage, which will eventually make it's way into stationary storage where mobile energy density (ie pack degradation) isn't as much of a concern.
The smartest thing Tesla ever did was finance battery manufacturing using luxury vehicle margins (stoking demand with a sexy, desirable brand), and have those customers (including myself) finance the depreciation and capital carrying costs of those battery sleds
Panasonic and Samsung make Tesla's battery cells; Tesla simply assembles them together. For now they're the big kahuna because they've locked up output through contracts but when they don't control the primary input to their "biggest product" they're at the mercy of their suppliers and the market.
You continue to be bearish for a company that successfully executes over and over (from Roadster 1.0 to hundreds of millions of dollars in free cash flow). Strange.
Having worked in the accounting industry, what Tesla has cannot properly be called free cash flow and were musk to make such a statement he would face SEC investigation and shareholder lawsuits.
I think we also disagree on Tesla's execution. Tesla has just barely managed to avoid death many times. That's not successful execution unless you define success as not failing.
Well, they are not just another new kid in the block. When their goals are to mass produce electric vehicles; to make it a viable option in the market; to move the entire industry in a new direction; to create advanced battery production capability, in my mind they have been nothing but a resounding success.
I guess the implication is that the manufactured cost is still significantly higher than the cost of the raw materials, which implies lots of room for improvement.
I wish more people understood that lithium and aluminum are transported almost entirely around the world on tanker fuel before they're made into a product - and then it's STILL cheaper to make new batteries than to recycle them.
I don't know enough to say the true impact is different than the stated impact or anything like that. But I have my suspicions that something isn't what it seems with lithium production.
Very late response, but most of the gradual decreases in price have been to increases in specific energy (kWh/kg). Smaller batteries cost less per kWh because there is less material in them.
Something like 80% of a typical lithium battery cost is drying it in an oven before sealing. Lithium cost is about 5%, possibly less. The other materials involved actually make up more of the cost than the lithium.
Why would that continue? Surely materials costs become more significant as other costs go down, which must be harder to reduce?