Tesla Motors is the first automaker to build an all-electric vehicle that can truly replace legacy gasoline cars. While other automakers produce low-range urban electric vehicles or plug-in hybrids, Tesla’s Model S is more than capable of driving across the country without a drop of gasoline. What makes Tesla different?

The obvious answer: a bigger battery

A casual observer might roll their eyes at the question. It is obvious, is it not? While cars like the BMW i3, Ford Focus Electric, and Nissan LEAF offer batteries of 19 kWh, 23 kWh, and 24 kWh respectively with all-electric ranges less than 85 miles, the Tesla Model S comes with a choice of 60 kWh or 85 kWh for a range of 208 or 265 miles.

Though the added weight of the extra capacity comes with an efficiency penalty, more battery means more range. Simple as that.

Or is it that simple?

Not quite. The missing factors are packaging and cost, and this is where Tesla truly shines. Designing an electric vehicle from the ground up meant that Tesla could almost literally do whatever it wanted – without the hindrance of a conventional ICE platform or traditional engine and transmission, the automaker was free to build the entire vehicle around the battery. (You may want to see the latest car batteries reviewed at EquipmentArea in detail).

The result was a flat slab that forms the floor of Model S, which enables a very large battery without sacrificing interior space. (The i3, also designed from a clean slate, employs a similar strategy). In fact, the interior volume of Model S is outstanding by all accounts.

Granted, the vehicle is much larger dimensionally than the aforementioned compact hatchbacks, but with a conventional architecture there is simply no room for 60 or 85 kWh of battery capacity at today’s energy densities. Witness the Toyota RAV4 EV, an SUV that could only reasonably fit 42 kWh of Tesla batteries.

There is also the question of aerodynamics – Tesla’s Model S excels in highway driving due to one of the lowest drag coefficients (0.24) of any production car. A less aerodynamic vehicle with the weight of a 60- or 85-kWh battery likely would not achieve the same range.

Industry-leading battery pack costs

Battery costs are notoriously hard to estimate in the electric vehicle industry for several reasons. Automakers and battery makers keep their mouths shut, and though costs drop every year the reductions are not reflected in the vehicles right away, as the battery packs in the cars themselves are not updated every year.

Future projections of battery costs vary widely, but Navigant Research (one of the most trustworthy sources) estimated industry costs at $500/kWh at the cell level in 2013 and projected reductions to $300/kWh by 2015 and $180/kWh in 2020. These estimates do not include the costs associated with the other components that make up a battery pack, such as electronics, cooling, and enclosures.

Navigant’s numbers are somewhat confirmed by Ford CEO Alan Mullaly’s admission in 2012 that the Focus Electric pack at the time cost between $12,000 and $15,000, or $520 to $650 per kWh at the pack level. Given that Ford’s cells are supplied by LG Chem, who also supplies the Chevrolet Volt, it is reasonable to expect Volt prices were similar but somewhat lower due to greater volumes.

The Ford Focus Electric is still using that same pack, with a next-gen version due in 2016. Both the Chevy Volt and Nissan LEAF have recently had minor updates to their batteries, though, so it is likely that their costs reflect the currently industry standard.

At the moment, that likely means something in the vicinity of $400-$450/kWh at the pack level, which would translate to about $6,800-$7,650 for the 17-kWh Volt pack and $9,600-$10,800 for the 24-kWh LEAF.

Tesla, on the other hand, is achieving battery pack costs in the range of $240-$280/kWh by most well-educated estimates. CTO J.B. Straubel confirmed those numbers last year, in a roundabout way, by asserting that the Model S battery makes up “less than a quarter of the cost in most cases.” This "most cases" likely refers to the standard 60- and 85-kWh models rather than the top-of-the-line P85 performance version.

The 60-kWh Model S retails for $69,900, while the 85-kWh model goes for $79,900. If Straubel’s statement is interpreted conservatively – that is, assuming he was referring to MSRP rather than manufactured cost, and taking exactly ¼ of the total cost to be that of the battery – we can tentatively deduce that the Model S battery pack cost falls somewhere between $235 and $290 per kWh, far and away the lowest in the industry.

The true reason Tesla’s battery is superior

So how does Tesla have such a great advantage in battery costs, even without the upcoming Gigafactory (which, by the way, will reduce costs a further 30% and likely more even without cell chemistry improvements when it comes online in 2017-2018)?

First it is worth exploring the strategies used by rival automakers. Every other OEM that produces a plug-in vehicle uses pouch or prismatic cells, also known as large-format cells. A main advantage of this technology is that larger cells mean a simpler pack with fewer cells, and the flat individual cells can be packed closely together.

Tesla, however, took a different route. The company purchases commodity 18650 cylindrical cells with nickel cobalt aluminum (NCA) chemistry from Panasonic, which are slightly larger than AA batteries. The first advantage is low cost from existing economies of scale for this small-format cell, which was initially developed for use in laptops.

Dr. Chris Rahn, co-director of Penn State’s Battery and Energy Storage Technology Center, explained Tesla’s advantage in using commodity cells to Torque News:

“By using off the shelf batteries, Tesla is able to keep state of the art without requiring specialized packs. Cylindrical cells also perform better than pouches.”

What does it mean to perform better? According to Dr. Menahem Anderman's Tesla Battery Report, the cells in Model S offer a specific energy of 233 Wh/kg due to the NCA chemistry and high-density electrodes. This is roughly 50% greater than the current industry standard, exemplified by the LEAF at 155 Wh/kg.

Another key characteristic of the 18650 cells is a lower capacity than the large-format variety. A Panasonic 18650 cell with NCA chemistry has a rated capacity of 3.1 Ah, while typical large-format cells vary widely but can be more than 50 Ah.

This means that small-format cells contain less energy, and therefore are inherently less dangerous. The 18650 cells also have a metallic casing, which improves durability. While other automakers opted for conservative designs with pouch cells of moderate energy densities for safety and reliability reasons, Tesla uses cells with the best energy density it can find and then puts more space between the 7,000 or so cells within the pack.

However, as automakers gain confidence in the technology, it is expected that next-generation battery packs due to arrive in a few years will use pouch cells with improved energy density to narrow the performance gap with Tesla's battery tech.

Safety first

Tesla CEO Elon Musk explained his company’s strategy to Bloomberg in the wake of the Boeing 787 Dreamliner battery fires:

“The approach we take at Tesla and SpaceX is we have smaller battery cells with gaps between them, and we make sure that if there’s a thermal runaway event which creates quite a bit of fire and smoke that it directs the fire away from other cells, so you don’t have this domino effect...

The long term solution for having a battery pack that’s reliable and safe and lasts a long time is to reduce the size of the cells, and have more cells that are smaller and have bigger gaps and better thermal insulation between the cells.”

Tesla is an innovator in cooling and safety, as the battery temperature is moderated by a complex liquid cooling circuit that quickly removes heat and allows Model S to draw a whole lot of power from the battery, and put it back in almost as quickly with Tesla Superchargers.

Tesla battery packs also use what is known as “intumescent goo,” which is a substance sprayed onto the cells and interior of the pack. When exposed to excessive temperatures, the goo will absorb the heat and undergo a chemical reaction that causes it to expand. This is in most cases a very effective safety mechanism.

However, an apparent exception is catastrophic penetration by road debris – the battery that forms the underbelly of Model S is more vulnerable in this case than with other designs, hence the underbody titanium shield that all new Model S are fitted with.

Another consideration of the merits of various battery technology is aging, which Musk alluded to in his Boeing comments. In this regard, Tesla appears to have it figured out better than most: while we won’t know the true effects of Model S battery aging for a few years, the early Tesla Roadster batteries have held up surprisingly well, especially compared with the early capacity degradation troubles of some large-format LEAF batteries.

This analysis by no means covers all the details of Tesla battery technology. Even though the company’s patents are now open to other automakers, there is much that Tesla keeps to itself. An excellent look at a few of the company’s critical battery technology patents can be found here at the Tesla Motors Club.

It is easy to imagine Tesla’s advantage in battery technology only increasing with the opening of the Gigafactory. Musk has said he “would be disappointed” if it took 10 years to get battery costs down to $100/kWh, a number at which Tesla vehicles would undercut the price of equivalent gasoline vehicles.

However, some industry analysts believe that pouch cells will catch up to Tesla's technology in both cost and energy density within several years.Those following the EV industry will be watching eagerly to see if that happens.

Note: This article was edited on 10/22/2014 to include additional information on pouch vs. cylindrical cells.