Enlarge Image Tim Stevens/Roadshow

When we read that Tesla was developing its own battery cells in a secret lab, we naturally assumed that Elon had set this up inside a volcano on an island in the South Pacific. That only makes sense, right?

Well, according to a report published Wednesday by CNBC, the truth about the lab's location is sadly much more disappointing (it's in Fremont, California), but what the lab is working on is pretty cool -- but that's also likely going to be problematic for Tesla's current battery partner, Panasonic.

Why would Tesla be trying to get out from under its longtime partnership with Panasonic? Well, costs, mostly. If it can develop and produce its own cells, then it no longer has to pay someone else to do it. This would, in theory, bring costs down, something Tesla is desperate to do these days.

Currently, Tesla vehicles use two types of cells. Models S and X use the older but still mostly industry-standard 18650 cells, while the Model 3 (and soon the Model Y) use the physically larger 2170 cell.

Getting all of Tesla's production on a single cell design would likely be a cost savings by itself, but developing cells that are more energy dense would allow Tesla to extend its cars' range, but more importantly, it could allow vehicles to maintain their current range estimates with fewer cells in their packs.

Tesla didn't immediately respond to Roadshow's request for comment.