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Tesla Motors Inc (TSLA) Changes Battery Cell Format For Model 3

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Tesla’s Elon Musk and JB Straubel explain why the battery cell format is being changed for the Model 3

Tesla Motors Inc (NASDAQ:TSLA) expects to start its lithium-ion battery production for its vehicles with Panasonic Corporation at the Gigafactory by the end of this year. The batteries that will roll out of the factory will not be the same as currently used in the Model S and Model X.

Like other battery-maker, Panasonic that is the strategic and sole battery supplier for Tesla vehicles current uses the ‘18650’ cell format, which implies 18 mm diameter and 65 mm length. While Tesla Roadster’s battery packs are supplied by LG Chem, Samsung SD supplies batteries for Tesla Energy.

However, Tesla plans to use a new ‘20700’ cell format, meaning 21 mm diameter and 70 mm length, for battery packs that will be used in the Model 3. The 20700 cell formats are wider and longer and capable of holding more raw materials insider compared to 18650 format. Tesla CEO Elon Musk confirmed this last month:

During a recent special media event at the Gigafactory, Tesla CEO Elon Musk and Tesla CTO JB Straubel explained that the company plans to optimize costs via the change in the cell format. They also got rid the extra ‘0’ from the ‘20700’ and renamed the cell format ’21-70.’

Mr. Straubel sad that the automaker has spent a lot of time regarding the cell format and questioned why the ‘18650’ format was standard in the industry, referring it as “an accident of history. The 21-70 format, which will likely be the new standard, was developed without preconceived notions and later optimized for size, output, and efficiency.

The 50 mm increase in length for the vehicle packs would offset with more efficient battery packaging, making that thickness of the packs the same or less compared to current packs with higher energy density. Mr. Musk said that once mass production is achieved at the battery factory, the new cells could be used to power the Model S/X, including Tesla Energy products. If all of the batteries product at the Gigafactory will be eventually used in all the Tesla products, then Panasonic will become the exclusive battery supplier.

With economies of scale and efficiently produced batteries, the automaker plans to reduce the Model 3 costs which would help in selling the vehicle at the planned price points and achieving the 25% gross margin target. The tens of billions of dollars expected from the Model 3 and help in financing the development cost of Model Y (compact SUV) and Tesla Semi.

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