Don't judge a book by its cover.

There is a common misperception that Tesla Motors (NASDAQ:TSLA) uses fairly commoditized battery cells for its vehicles. Over the years, there have been comparisons to laptop batteries, primarily because Tesla uses a very common form factor (18650) that is indeed used in many applications, including low-end laptops.

But it wouldn't make sense to use the cheapest components available for a $70,000 electric car.

It's what's inside that counts

Lithium-ion is a broad category that covers a wide range of battery cell chemistries, and different chemistries with different additives exhibit different performance characteristics. One of the most important performance metrics is the battery's useful life, since once an EV's battery needs to be replaced, it is incredibly expensive. Cycling a battery through extreme temperatures is quite damaging to the underlying cells and reduces overall life and capacity.

The early generation Nissan Leafs suffered from major capacity loss in extreme temperatures due to the underlying chemistry chosen, as well as the fact that the Japanese automaker did not implement an effective thermal management system. Customers in hot climates like southern California or Arizona, among other places, were experiencing battery capacity reductions of nearly 30% within the first one to two years of ownership.

Those first Leafs had an official EPA-rated range of just 73 miles right out of the box, so cutting out over a quarter of that range within such a short period of time just plain sucks for consumers. There was a class action lawsuit early on related to the issue, which Nissan settled just last year (three years after the suit was initiated), after the initial proposed settlement was rejected.

Party like it's 2013

While I'm not a battery engineer, nor do I play one on TV, I recently watched a riveting presentation from Jeff Dahn, a professor at Dalhousie University and one of the world's leading battery researchers. To be clear, this is a presentation from 2013 and the competitive landscape has certainly changed since then, but it's still worth acknowledging that there are different scientific approaches to the broad umbrella of lithium-ion chemistries.

Included in the presentation was a slide that displayed 16 different charts. There's a lot going on, but each column represents a different type of lithium-ion cell chemistry. The rows represent different temperatures in Celsius of the experiment conditions. The actual data being plotted represents the Coulombic inefficiency of different chemistries over time (adjusted for various cycle rates). Simply put, lower is better since the goal is to minimize inefficiency across diverse temperature ranges in order to maximize battery life.

After explaining the slide in detail and discussing the varying chemistries, Dahn showed which methods were being utilized by different automakers (as of 2013):

Both Nissan and GM's battery partner LG Chem were using a mix of the second (nickel cobalt manganese) and fourth (lithium manganese oxide) columns, with roughly half of each. Fisker used lithium iron phosphate cells.

During this time, GM was using thermal management while Nissan was not. Tesla was using a chemistry similar to the first column (lithium cobalt oxide) combined with active thermal management.

Back to the future

It's now been about three years since this presentation, and presumably other automakers and battery makers have adapted. I would assume that GM and LG Chem have since transitioned to better cell chemistries.

Nissan quickly learned from its mistakes and implemented a different cell chemistry in 2014 for the Leaf, offering replacement batteries with heat-resistant cells for $5,500, which was actually quite low at the time. Nissan was likely absorbing some losses in order to satisfy early adopters.

More recently, Tesla scored a contract with Dahn last year for a five-year exclusive partnership intended on improving battery life and performance. Tesla will support Dahn and his team of graduate students, though no financial details were disclosed. The contract actually starts this month, following the completion of another corporate research project that Dahn was working on (not another automaker).

If Tesla was ahead three years ago, when the Gigafactory was merely a spark in the back of Elon Musk's mind, where do you think the electric-car maker is now?