If the latest buzz is to be believed, then Tesla is now building resources to make its own battery cells as told by five current and recent employees. However, this is being done secretly. Since 2014 , Panasonic is manufacturing battery cells for Tesla but now it seems that Tesla is heading towards independence. According to an employee, Tesla is developing its own “advanced” lithium-ion battery cells as well as the processes to manufacture them at scale.

Well, it is not hard to guess the reason behind this decision. This would help Tesla to produce cheaper, better-sustained performance electric cars than it does today, without paying or sharing data and resources with outside retailers or partners. According to research by IHS Markit, the battery pack and battery cells are the main cost component in an electric vehicle. This could also cut costs by removing go-betweens like Panasonic, making that $25,000 EV more feasible.

At the company’s annual shareholder’s meeting in June this year, CEO Elon Musk accepted that the company has been “battery-constrained” in the past. That implies that a lack of batteries limited Tesla’s production and sales of electric vehicles and energy storage systems (Powerwalls and Powerpacks).

Making its battery cells is another step towards Musk’s general aspiration to make Tesla as vertically unified as possible, which means developing, manufacturing, and selling everything it can — even its own enterprise software.

This is not something new for Tesla. Unlike other automakers, it owns its supply chain rather than relying on vendors. It builds its own seats at a facility down the road from its Fremont car factory, for instance, and it recently started making its own chip for its autonomous features, taking over those duties from Nevada.

Tesla’s CEO Elon Musk believes in eliminating links in the chain where possible — getting inspiration from Apple, which under Steve Jobs adopted an aggressive strategy of taking control of key parts of its own supply mix and continues to do so where it can economize out improvements to component cost.

Not to overlook but producing a high volume of cells is another ambitious task that recently executed cost-cutting measures and is still struggling to perfect its high-volume vehicle production. Upon inquiring from Tesla and Panasonic, both the companies were not available for response.

THE PRIVATE RESEARCH

The company’s employees are conducting a few of their battery cell manufacturing research at a “skunkworks lab” at Tesla’s Kato Road facility, a few minutes from its car plant in Fremont, California.

Tesla manufactures its Model 3, Model S and Model X vehicles in the same plant today, while its batteries are manufactured at the Gigafactory in Sparks, Nevada, a factory conjointly owned and operated with Panasonic.

Tesla’s battery R&D teams are now concentrating on designing and prototyping advanced lithium-ion battery cells, coupled with new equipment and processes that could allow Tesla to produce cells in high volumes, employees and former employees said.

Only last month, Tesla has posted job listings for many engineers involved in equipment for producing battery cells, battery cell design and manufacturing processes to make batteries.

But there is no immediate cut off ties with Panasonic or other battery suppliers soon even if Tesla’s effort to start producing battery cells is successful.

Tesla employees acquainted with cell supplier negotiations said the company would continue to collaborate with Panasonic and LG to make available the cells that go into the preliminary Model 3 vehicles made in its Shanghai factory. That factory could start manufacture by the end of 2019, with mass production beginning in 2020.

The goal to start at least some battery cell manufacturing in-house has been widely discussed within Tesla and among its admirers.

Musk requested Chief Technical Officer JB Straubel and Vice President of Technology Drew Baglino to come on stage and inform shareholders about battery-related initiatives at Tesla at the company’s annual shareholder meeting in June

Musk welcomed outside investors to emphasize on two strategic issues at Tesla: In what way the company can offer fully self-driving vehicles, and its plan to “scale battery production and get the cost per kilowatt-hour lower.” He said Tesla wasn’t prepared to let the “cat out of the bag” yet and would disclose further details — including about the company’s take over of Maxwell Technologies, finalized in May this year — at a financier battery and powertrain day before the closure of 2019.

Straubel believed that Tesla needs a large scale solution to cell production and it is more evident than ever.

Baglino added that the company is taking all the steps required to be masters of its destiny here, technologically and no one is sitting idyll. He also said that after all the experiences with partners Tesla needs to find a solution for it.

Strained Relationship

The rift between Panasonic and Tesla is probably a significant reason why Tesla is planning to make its own battery cells. It might provide a reliable option in case the relationship between Tesla and Panasonic goes south. Panasonic began a joined venture with Toyota in January to build car batteries together. In early April, Panasonic announced it would briefly freeze its savings in Tesla Gigafactories.

After few days, Musk accused Panasonic of slowing down the speed of Model 3 production, saying its cell lines were working at only two-thirds of their capability, or 24 GWh, at their shared Gigafactory. Musk tweeted that Tesla won’t spend money on more capacity until existing lines get closer to 35GWh theoretical.

In the past few weeks, following dismissals and other cost-cutting efforts by Tesla, Panasonic has recruited several previous Tesla employees at the Gigafactory in Nevada, including supervisors, technicians, and systems and process developers, according to LinkedIn profiles and current and recent Tesla employees.

A former Tesla human resources employee who wishes to remain unnamed said that jumping from Tesla to Panasonic at the Gigafactory was not as frequent just a few years ago. A more transparent training, compensation, and strategy around schedules, especially how to make and get time off, help draw Tesla employees over to Panasonic, he said.