Most people’s biggest mistake when evaluating Tesla is overestimating the competition from Big Auto. Many people are skeptical that Tesla has any competitive advantage. They talk about how Tesla has open sourced their patents. They say “It’s just batteries, how hard could it be?” So what is their competitive advantage?

In 2007, Martin Eberhard, then the CEO of Tesla, testified

The auto industry battery consortium, USABC, set about to invent automotive batteries made from specialty cells for cars; Tesla uses commodity cells to make its automotive batteries. This is why Tesla’s battery is cheaper, higher capacity, more reliable, and more available than anything produced by USABC.

So in the last 11 years has Big Auto learned anything? Not as far as I can tell. Tesla still uses commodity cylindrical cells whereas other car manufacturers still use prismatic (Chevy Bolt) and pouch (Nissan Leaf) cells. Manufacturing cylindrical Lithium ion battery cell manufacturing has been honed since 1991 when Sony first started manufacturing them. They have been used in laptops for many years.

Cylindrical cells are small and it requires thousands to build a battery pack for an automobile. Tesla Model S and X use 18650 lithium ion battery cells. They are 18mm in diameter, 65mm in height. The Model 3 uses slightly larger 2170 lithium ion batteries, 21mm in diameter, 70mm in height.

Comparison of AA to 18650

On the high end, the Tesla Model S and X 100 kWh pack has 8,256 battery cells. On the lower end, the Model 3 with 50kWh pack has 2,976 battery cells. Compare that to the Chevy Bolt, it has 60kWh pack with 288 battery cells. The Nissan Leaf has 192 battery cells. The tradeoff is that Tesla’s batteries are cheaper, but smaller and more difficult to assemble, whereas the larger cells are more costly but easier to assemble.

The low cost commodity strategy continues to be one of Tesla’s biggest competitive advantages. They likely have the lowest cost per kWh. But how does Tesla assemble so many batteries into a pack economically?

As far as I can tell, no one knows exactly. I can’t find a picture or video of the robots that assemble the cells into packs. These robot would need to wire bond the batteries to the bus bars. For every battery cell there will be 2 wire bonds (positive and negative). So it’s a lot of work. The robots need to be very fast, otherwise Tesla would need a lot of them to mass produce battery packs and it would drive up their costs.

One hint about the process is from this Wired article by a former employee. The Model S and X battery packs are assembled in the secretive 2nd floor at Tesla’s Freemont factory.

Unknown to most visitors, the factory’s “secret” second floor built many of Tesla’s battery, power electronics, and drive-train systems. It was home to some of the most advanced manufacturing and automation systems in the company. Some of the robots moved at such high speeds that their arms needed to be built from carbon fiber instead of steel.

On Q3 2017 earnings call, Elon Musk stated

we are pushing robots to the limit in terms of the speed that they can operate at, and asking our suppliers to make robots go way faster, and they are shocked because nobody has ever asked them that question. It’s like if you can see the robot move, it’s too slow. We should be caring about air friction like things moving so fast. You should need a strobe light to see it.

So… where are they? Where are the robots that are being pushed to their limit in terms of speed?

There are some pictures from the GigaFactory, where Model 3 battery pack is manufactured, but none where I see a robot wire bonding the battery cells. I don’t see any machines that are close to moving so fast you would need a strobe light to see.

As far as I know, no traditional auto manufacturers are planning to use commodity cylindrical cells (edit: Jaguar may be an exception). As such, their batteries will probably always be more costly than Tesla’s batteries. Even if incumbents decided to use cylindrical cells, it will be challenging to engineer a manufacturing process that is economical, and not time consuming. Packaging cylindrical cells is a process Tesla has been refining for over 10 years.

Also consider that Grohmann Engineering were consultants that helped build the battery pack assembly lines. Tesla acquired them. Then forced them to drop all other clients.

Big Auto is screwed.