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A Top Tesla Competitive Advantage: Batteries

YouTuber “Ticker Symbol: YOU” recently uploaded a video of ARK Invest’s Cathie Wood sharing some thoughts on Tesla’s huge growth and historic lead in the smart electric vehicle industry. The host of the video, Alex, explained that Tesla is one of the most difficult companies to understand in terms of value.

“It’s not a car company. It’s not an energy company. And it’s not a software company. Despite climbing by well over 500% in the last two years, Tesla’s stock symbol [TSLA] is still ARK Invest’s #1 holding by a huge margin, meaning Cathie Wood’s performance is heavily tied to Tesla’s.”

The video is a blend of Alex’s analysis with Cathie Wood’s thoughts on some of Tesla’s achievements. It covers:

  • Tesla Batteries.
  • Tesla Gigafactories.
  • Tesla FSD V9 (Vision Only).
  • Tesla’s Robotaxi Lead.

For this article, we’ll dive into the batteries and you can enjoy the full video for Alex’s full analysis.

Alex said that Tesla’s batteries are the company’s immediate competitive advantage and shared a clip of Cathie Wood speaking about Tesla’s battery technology at a recent webinar with Kamco Invest.

“I think what happened was, again, these auto companies hadn’t changed in 100 years and they didn’t have to. They changed incrementally and here you get this upstart, this pipsqueak, this rebel, saying in the early days ‘I’m going to build my car on top of cell phone batteries.’ And mind you, cell phone batteries were blowing up on planes and were banned, right? So the auto industry laughed at him and auto analysts laughed at him.

“And we took what he was doing and said, ‘Okay, let’s see if we can figure out what the heck he’s talking about here.’ And this comes down to that learning curve and cost decline, which is all important in innovation. What he effectively was doing was he was taking a technology that had been riding down a cost curve for years. It’s called the consumer electronics industry.

“Think cell phones and laptops and any electric device. And he basically said, ‘I am going to build this car on top of a cost curve that has been falling for years and I’m going to accelerate that decline with a new use case.’ And so, that’s what he did with cylindrical batteries, lined the bottom of the car — whereas most other auto manufacturers, their form factor and their batteries were were very different lithium-ion pouch batteries, which were at a much higher cost point.

“So we mapped out those two cost curves and we said, ‘When will the traditional auto manufacturers with their battery technology become competitive with Tesla’s?’ And we thought that was going to be in the early ’20s, but because of the innovation around the battery pack system — Elon putting silicon in the anode of the battery and experimenting with other chemistries — we believe Tesla is 3 years ahead of the traditional auto industry. “

Alex noted that the actual batteries are getting better and pointed out a “sweet spot” in the battery’s cell diameter between lowering and increasing range. He explained:

“Tesla is building their new cells in that sweet spot. Their latest battery cells are called the 4680s because they have a 46-millimeter outer diameter and an 80-millimeter height. The problem with bigger batteries is that the electron has to travel further to get to the exit, which is called the tab. So Tesla came up with a new tabless design that changes how electrons reach this exit. This design is also simpler and had fewer parts, making it cheaper to make.”

He also added that the new tabless design addressed another complaint that some drivers of fossil fuel vehicles have about making the switch to EVs. That issue is charging times when you need a fast charge — on a road trip, for example. With the new design, electrons can take the same shorter path into the battery as they would take when going out of it. This means a shorter charging time. Alex also described the importance of silicon in the batteries and how Tesla’s flexibility with its battery advancement is a key benefit of its vertical integration:

“There’s also important advancements being made in the battery chemistry itself. For example, Tesla is adding in raw silicon and a polymer coating which allows batteries to expand a bit without failing and increases the range by up to 20%. And of course, since they’re in control of their battery chemistry, Tesla can separate batteries by application and make the most of their resources.

“They can use more nickel for high-power applications, like moving a lot of mass. They can use manganese with nickel to increase range for premium vehicles and have lithium-iron batteries for the cars where cycle life matters more than range, like in Tesla’s Powerpacks and in the small cars designed for urban areas. This is a huge advantage of Tesla being so tightly vertically integrated.”

Tesla’s other competitive advantages, according to this analysis, are its gigafactories, Full Self-Driving with vision only (no radar, let alone lidar), and its future robotaxis. Alex takes a dive into each of these while including clips of Cathie Wood discussing them. His analysis is spot on, in my opinion, and you can watch his full video here.

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Written By

Johnna owns less than one share of $TSLA currently and supports Tesla's mission. She also gardens, collects interesting minerals and can be found on TikTok


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