HyperChange CEO Advances Bold Theory
June 14th, 2019 by Paul Fosse
As reported here and here, there was a lot of information presented at the 2019 Tesla annual shareholder meeting. And although there were a lot of small details covered and hints given about the future, there wasn’t any earth-shattering news. In my summary, I noted they didn’t “let the cat out of the bag.” But I didn’t really know what the cat was, so I didn’t comment.
HyperChange CEO Galileo Russell just laid out what he thinks the cat is. First, though, some background. Galileo was in the room and wasn’t just watching the presentation we all saw. He was watching the body language of the Tesla Board of Directors we couldn’t see. He noticed throughout the presentation two themes were consistently emphasized.
- There is no demand problem. Many, including Matt Pressman, noticed this was a consistent message.
- Tesla’s gating factor to scaling vehicles and the energy sector is battery cell production.
After working so hard getting Model 3 through “production hell,” Tesla execs feel confident they can build many more Model 3’s and Model Y’s, if only they can get enough battery cells to make them. As we noticed in this excellent article on Tesla’s partnership with Panasonic, Tesla hasn’t been satisfied with the quality or production ramp that Panasonic has delivered. I think Tesla chose to work with Panasonic in the past because battery cell manufacturing was so capital intensive that they were dependent on Panasonic to help finance all the machines needed to build a massive number of battery cells.
Image courtesy of Maxwell’s Technology Presentations
But as we covered here, one of the biggest expected benefits of Maxwell’s dry electrode technology is that it is expected to provide a 16× production capacity density increase. YouTubers Sean Mitchell and Galileo go into more detail on this subject if you are interested.
Vertically Integrate Battery Cell Production
Image Credit, HyperChange TV
Before this speculation, most of us thought Tesla would use the Maxwell technology to contract with Panasonic to build its batteries better, but in Gali’s new video (embedded above), Galileo’s theory is that instead of doing that, maybe Tesla will use the conversion from wet electrode to dry electrode to take over battery cell production from Panasonic.
His reasons are:
- Maxwell’s technology leapfrogs Tesla’s work with Panasonic.
- Tesla’s biggest moat is that its batteries have the most range, charge quickly, are very reliable, and last a long time.
- This will help both their vehicles and their energy businesses.
- It will have huge impacts on both cost and efficiency of batteries.
In addition, I think there is a major culture difference between Tesla, which is extremely aggressive, and Panasonic’s more conservative corporate culture. Tesla until now has had to just deal with these issues because the capital costs to ramp battery cell production were too high for them to take on.
Ever since I started following Tesla several years ago, getting enough battery cells has been a been a constant problem for the company. At this point in the meeting, JB Straubel (Tesla Chief Technical Officer) and Drew Baglino (VP of Technology) said the words that actually let the cat out of the bag. JB said, “we need a large-scale solution to cell production.” Now, just that quote implies they are making massive changes to their cell production, but if you read between the lines, Drew’s words give away that they are bringing it in house. Drew said, “We are making all the moves to be masters of our own destiny.” Even though I summarized the key takeaways of the video, Galileo does a great job giving many other key insights on the meeting and I recommend you watch the whole video is you have the time.