Why Couldn't Tesla Just Swap Batteries?

Recently, I wrote an article about the advances in battery and other green technology that could be a risk factor for Tesla Motors (NASDAQ: TSLA  ) . A question that was raised was why Tesla couldn't just switch to another battery technology. That's a very good question. Here's why it's not as easy as it sounds, and how it could affect Tesla's stock.

Photo: Oleg Alexandrov, via Wikimedia Commons. 

Is it easy to switch between batteries?
In a Congressional Research Service for Congress, Bill Canis wrote regarding the development of lithium-ion batteries, "the automaker's decision as to which battery to procure will be in effect for a prolonged period, perhaps the life of the vehicle model, as a battery designed for one vehicle may not function optimally in another."

He also points out that even when an automaker enters into an agreement with a battery manufacturer -- as Tesla, Nissan (NASDAQOTH: NSANY  ) and Toyota (NYSE: TM  ) have done with Panasonic  (NASDAQOTH: PCRFY  ) -- the automaker is "integrally involved" in the design and production of the battery.

The reason is straightforward: Each automaker has proprietary technology that reacts in a specific way with the battery's output and overall vehicle operations. As General Motors (NYSE: GM  ) put it, "The Volt's battery pack design is directly coupled with the vehicle design to assure complete integration between the battery pack and the vehicle." 

In other words, each battery is designed specifically for the car it's going to be used in -- a battery made for a Tesla Model S is optimally designed for that car; a battery made for a Nissan Leaf is optimally designed for i car. More pointedly, the battery itself influences the car's design.

Swap shop
So is Tesla tied to its current battery? Absolutely not. Tesla uses a modular battery design, and as technology advances in li-ion batteries, it can swap out the cells. But that's swapping li-ion for li-ion. As technology changes, Tesla could switch to a different battery type, but it's not as simple as swapping one battery for another; the battery itself has to be specifically designed to integrate with Tesla's vehicles.

Consider: When Tesla designed its battery pack and electric powertrain system, it did so to meet the requirements of a li-ion battery. Tesla states: "Designing an electric powertrain and a vehicle to exploit [li-ion battery] energy efficiency has required extensive safety testing and innovation in battery packs, motors, powertrain systems and vehicle engineering. Our proprietary technology includes cooling systems, safety systems, charge balancing systems, battery engineering for vibration and environmental durability, customized motor design, and the software and electronics management systems necessary to manage battery and vehicle performance under demanding real-life driving conditions."  

Different types of batteries behave differently. More importantly, li-air batteries are still being developed, so things like specific energy, energy density, specific power, charge/discharge efficiency, self-discharge rate, and cycle durability are all theoretical. However, two known differences are size and weight -- li-air batteries are smaller and lighter. Consequently, you can't simply exchange a li-ion battery for a li-air battery.

So what does this mean for Tesla?
There are a number of ways Tesla could incorporate new technology:

1. It could completely redesign its vehicles around the specifications of new battery technology -- the most expensive option, and unlikely.

2. It could combine its li-ion battery with a new type of battery, as is believed to be the case with its patent for metal-air batteries -- unfortunately, this still uses expensive li-ion technology. 

3. It could leave the car design unchanged and retrofit a completely new battery with the same form, fit, and function of li-ion-- however, depending on the makeup of the battery, that could negatively affect optimum performance.

But no matter how you break it down, there has to be a redesign somewhere, and that spells cost.

For a large company like Toyota or GM, that cost is something they can afford. However, Tesla is not on the scale of Toyota or GM. In fact, until recently, Tesla had a net loss every quarter since the company's inception, which through last Dec. 31 accumulated to a total net loss of $1,065.6 million. Furthermore, Tesla's recent profits are largely due to the Model S. That's one car. Yes, it's an absolutely beautiful car, and a technological masterpiece, but Tesla's business model is dependent on widespread acceptance of the Model S, as it intends to use those profits to develop the Model X. What this basically boils down to is that Tesla may not have the necessary resources for a new battery. 

Can't Tesla get new battery cells from Panasonic? The short answer is yes. But that doesn't negate the need for research and development. Panasonic and Tesla have a history of partnering in battery design, But that's exactly what it is -- a partnership. It's not all Panasonic footing the bill. Further, a partnership would rely on Panasonic's desire to make a li-air battery for Tesla. Although I think it's highly likely it would, how much that'd cost Tesla is uncertain. 

A look into the future
Future technological advances in batteries is a risk to Tesla because of the cost involved. Could Tesla switch to a new battery? Of course. Did I say it couldn't? No. But given Tesla's recent profitability after 10 years of net losses, the cost that battery could require would probably hurt Tesla's bottom line -- whether it's a little or a lot. Therefore, it could also hurt Tesla's stock price. Finally, batteries themselves may not be the future for green cars. As I've written before, cryogen (liquid) air powered engines are re-emerging as a possible alternative energy. They use existing infrastructures, and the technology is such that energy stored as liquid air would allow "wrong time" energy produced by wind farms, and other sources, to be stored for later use.

This is a big deal. Consequently, this is something investors would do well to monitor.

With the American markets reaching new highs, investors and pundits alike are skeptical about future growth. They shouldn't be. Many global regions are still stuck in neutral, and their resurgence could result in windfall profits for select companies. A recent Motley Fool report, "3 Strong Buys for a Global Economic Recovery," outlines three companies that could take off when the global economy gains steam. Click here to read the full report!


Read/Post Comments (17) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 29, 2013, at 11:25 AM, GeorgeStrong wrote:

    argle-bargle

  • Report this Comment On June 29, 2013, at 11:46 AM, drax7 wrote:

    Sounds like casting doubt on tesla to undermine the firm. Tesla can handle whatever battery technology emerges, and they have a great lead in that area.

    Liquid air, what nonsense, get real.

  • Report this Comment On June 29, 2013, at 12:28 PM, jamesdan567 wrote:

    The most efficient method to drive a car is with an electric motor. The most efficient method to drive an electric motor is with a battery. The most efficient method to charge a battery is with a solar panel because the fuel needed to create electrons (photons) are free, limitless, clean, available to everyone equally. All other methods, (coal, fuel cells, gas, nat gas, cryo etc) require more inefficient steps, like mining, drilling, transport, refining, conversion, storage, compression, decompression, oxidation, etc)

  • Report this Comment On June 29, 2013, at 12:32 PM, paul10p wrote:

    Dear Katie,

    You're either completely uninformed and desperately need to do more research before putting out an article, completely ignorant or purposefully trying to undermine Tesla stock. Which is it? Your article is so FILLED with fallacy and erroneous qualifiers that it was difficult to read.

    The computer you wrote this article on doesn't care if the power generation is from coal, hydro, natural gas or nuclear. It simply wants 110v. Much like the Tesla. You can run the motors/automotive systems on anything that will produce electricity. It's all about the interface and that doesn't cost a great deal of time or money to develop by comparison.

    Tesla is not the end all be all of future car companies but for crying out loud, give them a chance to compete with the gas suckers that are destroying the environment.

    Thanks for listening,

    Pablo

  • Report this Comment On June 29, 2013, at 1:02 PM, AlaaSadek wrote:

    Where did you study Physics?

    The next thing you will do is teach us some maths; were 2+2 will equal 2 if you are buying but 22 if you are selling!

  • Report this Comment On June 29, 2013, at 1:05 PM, Diggitydog27 wrote:

    Pablo, actually a computer does care. The battery has to fit into the battery slot, and have the same form/fit/function of what the computer was designed to use, and actually there's a lot to that. Oh, and guess what? Tesla has spent YEARS perfecting its interface in conjunction with its battery pack, and no, it wasn't cheap. Maybe you need to do some more research about how batteries work before criticizing a pretty in-depth analysis. I mean, seriously, if it was as simple as you're trying to make it out to be, everyone would be driving a battery powered car, and all the kinks would be worked out!

  • Report this Comment On June 29, 2013, at 2:13 PM, StanO6 wrote:

    @Diggitydog27 Elon has stated "battery agnostic". So, the question becomes:

    Spence or Musk?

    Sorry! I just spewed coffee out of my nose onto my keyboard!

  • Report this Comment On June 29, 2013, at 2:18 PM, Connelky wrote:

    I would have cited an electrical engineer on this subject before a congressional study.

    If you are switching from a less energy dense battery to a more energy dense battery, but are keeping the same form, fit and function, you have bought yourself a lot of room for adjustment. Things like safety systems and cooling systems have more room to work with so all the needs can be met.

    It is always better to do a fresh design, and I find it commical that people believe that the big automakers are more likely to create an original design before tesla.

    These big guys are still just taking existing models and converting them to electric, and it ends up being not such a great car. Rav4, spark, fit... All these are converted ice vehicles.

    Tesla had the smarts to build in the ability to easily swap the batteries, which indicates to me that they are not married to li-ion.

  • Report this Comment On June 29, 2013, at 2:47 PM, Diggitydog27 wrote:

    Hey Stan06 maybe you should know what "battery agnostic" means before you go and ruin your keyboard.

    Tesla assembles its packs from lithium-cobalt cells commonly used in laptop batteries, but Musk said the company is “battery agnostic” and suggested it could start using Li-Tek batteries once they’re available.

    http://www.wired.com/autopia/2009/05/daimler-tesla/

    Tesla can use other batter manufactures and LITHIUM-ION cells, so it's not tied to one supplier = battery agnostic. That doesn't mean it can go and switch technology without a redesign!

  • Report this Comment On June 29, 2013, at 3:16 PM, FlyingPigNJ wrote:

    The author seems to be missing the whole point of battery swapping. Hopefully fool is not relying on such an incompetent intern for analysis.

    Battery swapping is really just a short term and for semi emergency measures regardless of what Tesla is marketing it as.

    There are plenty of holes in battery swapping story, but you had to pick the wrong one to poke.

  • Report this Comment On June 29, 2013, at 3:47 PM, s2dbaker wrote:

    Thanks for pointing out that new technology costs money. I'm sure no one has ever though of that before. Come to think of it, I bet that if Tesla ever decides to make a new model, designing that might cost some money too. I'm selling short right now!!

  • Report this Comment On June 29, 2013, at 6:07 PM, IanERichards wrote:

    Katie,

    This was not your finest hour, and the bloodhounds have been piling in. But at least you tried.

    Hang in there! Better days will come.

    Ian

  • Report this Comment On June 29, 2013, at 6:08 PM, rudolfvs wrote:

    If you are unlucky enough to have a Tesla, you should trade it in for a real car while there are fools about who are willing to buy a 2nd hand Tesla.

  • Report this Comment On July 01, 2013, at 4:48 PM, Indiefundit wrote:

    I would agree with the person who suggested referencing an electrical engineer as a proposed architect of any thoughts about battery tech. But to over simplify - as long as you get the output from a more energy dense package - and since you have the influence to make the battery makers deliver to your specs when you're Tesla - I feel fine in both the short term trading prospects and the long term value prospects of this company. Cheers!

  • Report this Comment On July 01, 2013, at 6:47 PM, jeffhre wrote:

    "However, two known differences are size and weight -- li-air batteries are smaller and lighter. Consequently, you can't simply exchange a li-ion battery for a li-air battery."

    You can always exchange smaller and lighter for larger and heavier. Going the other way around would be a problem, possibly even catastrophically so.

  • Report this Comment On July 03, 2013, at 12:26 AM, amccalme wrote:

    The difference between GM and Tesla is efficiency. Small companies can move faster with greater cost effectiveness. Tesla has already released two generations of car and battery and is telling us now that while MAKING A PROFIT they are working on their third generation. Assuming that a new battery requires ALL of the engineering effort that went into the previous, and as an engineer in R&D I do not believe that, they're already well into validation of their Gen3 product. This makes it clear that they can weather the storm of advancing battery technology.

    You seem to prefer GM in the electric car game, but did you ever consider that they are behind on what they already do best? (ICE). Look at it from a powertrain perspective. GM was late to the party with their terrible 6 speeds and here they are with their pants down while 8 speed cars are running amok and making others money. I believe Tesla will put them under using their agility to beat GM or any other major automaker to the table with the new technology. If I'm wrong, ill lose a few bucks. If I'm right, ill make a few, and you'll lose a lot on old Government Motors.

  • Report this Comment On July 14, 2013, at 9:37 PM, jeffhre wrote:

    Diggitydog27,

    "Tesla can use other batter manufactures and LITHIUM-ION cells, so it's not tied to one supplier = battery agnostic. That doesn't mean it can go and switch technology without a redesign!"

    That sounds about right! Also switching would include some intense conversations with battery supplier AND investor Panasonic!

Add your comment.

DocumentId: 2516630, ~/Articles/ArticleHandler.aspx, 4/19/2014 6:07:19 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement