Analyzing Tesla's Battery Production Investment

Rob Maurer

Tesla's Battery Day event outlined Tesla's plans to become one of the biggest companies in the world, but that growth won't come without significant investment.

Tesla hopes to grow annual battery production to 3 terawatt-hours (TWh) over the next decade, and during Battery Day they provided a couple hints on how much they expect scaling battery production to cost.

Across the automotive and energy sectors, Tesla calculates that 20 TWh of batteries will need to be produced each year to convert both sectors to sustainable energy. Under present-day battery manufacturing costs, Tesla says that would require a $2 trillion dollar investment.

Goal One Problem Today's Battery Factories Cannot Scale Fast Enough

Under such assumptions, Tesla would need to invest about $300B by 2030—about $33B per year—to ramp battery production to 3 TWh per year.

However, later in the presentation, Tesla announced they believe they have found a path to reducing required investment per GWh by 69% (1,000 GWh = 1 TWh). Applying that reduction to the earlier numbers indicates Tesla believes it will take somewhere around $93B in investment to ramp battery production to 3 TWh by 2030, about $10B per year.

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That investment would be in addition to Tesla's continued investment in the non-battery portions of vehicle and stationary storage product production.

With fewer pandemic-related production shutdowns in the second half of the year, investors will be eagerly awaiting Tesla's free cash flow numbers for a better gauge on how much investment Tesla may be able to fund internally versus raising additional capital.

For more analysis on Tesla's Battery Day and their growth plans, please see the included video and be sure to follow Tesla Daily on The Street.

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Disclosure: Rob Maurer is long TSLA stock and derivatives.