Any day now, Tesla Motors (NASDAQ: TSLA) may complete a deal with Samsung SDI (KSE: 006400) to diversify its lithium-ion battery supply while giving a boost to its manufacturing capacity.
The move would give the already impressive automaker added strength and two good legs to stand on.
According to reports from The Korea Herald, the final stages of tests are being conducted to make Samsung SDI Tesla’s second major battery supplier alongside Panasonic (OTC: PCRFY).
Tesla has been looking to diversify its battery supply for some time now, and this latest move might just be the beginning, as Tesla shows it has no qualms about reaching out to Panasonic’s competition.
If you’ve been following Tesla at all, you know the automaker is going a mile a minute, and as the company grows, so too does its need for more batteries. Sales of its highly touted Model S are expected to grow exponentially in the next couple of years, starting with 21,000 in production this year.
A strong supply line would Tesla the insurance and fortitude needed moving forward. After all, when overall finances fall solely on one battery from one Japanese supplier, it wouldn’t take much to set things off track. One single natural disaster could disrupt Tesla’s present supplies, as ValueWalk points out. Just take one look at Fukushima in 2011 and the catastrophic implications that a tsunami and its aftermath caused that region.
Added supplies insure the company and its investors. Besides, the company would need to expand its capacity soon regardless.
Samsung SDI would be leading the charge as the first battery supplier to provide an alternative to Panasonic. Samsung SDI’s lithium cells are currently being used in the BMW (OTC: BAMXY) i3 and the Fiat (OTC: FIATY) 500e, and we could see them popping up with Volkswagen (OTC: VLKAY) in the very near future if rumors hold true.
Panasonic has been Tesla’s sole battery supplier for a while now, and together the two companies have flourished, but looming concerns about possible supply disruptions and a growing demand for Tesla vehicles has pushed Tesla to seek additional supply lines.
It’s the actual battery cells that Tesla needs from Panasonic and Samsung SDI, according to Torque News – an 18650 format cell with cylinders of 18mm in diameter and 65mm in length, to be exact. Tesla manufactures the battery management system and the battery container – the two other components that make up Tesla’s battery pack – on its own.
Before the two companies can finalize the deal, both sides are carrying out final tests that include safety and driving stage measures. Tests on the lifetime of the battery are being carried out by Samsung Electronics Co., Ltd. (KSE: 005930).
Upon completion, Samsung SDI will officially become a Tesla battery supplier.
The vehicle in which the battery will be used is still unspecified, although it will most likely be in the Model S sedan that has seen tremendous demand after its high marks and ratings. It may also be included in its Model X crossover vehicle, expected to be in production next year.
Expanding Battery Capacity
LG Chem (KSE: 051910) was also a possible choice before Tesla went with Samsung SDI, but the company could be part of a move if Tesla decides to further diversify. The same goes with Chinese battery maker and EV company BYD, which could be in its own talks with the automaker.
Panasonic isn’t sitting idle, either. It has ramped up production with two additional facilities set for production in 2014.
Tesla is leaving the door wide open to offers as it makes a beeline for the top of the electric vehicle market. Right now, Panasonic and Samsung SDI have proven worthy of the task.
Battery production in general will become a bottom line for any company taking on a partnership with Tesla and its quest for EV supremacy.
The man behind the wheel, Elon Musk, Tesla’s founder and CEO, envisions hundreds of thousands of vehicles rolling off the lines in coming years, and its 3rd generation vehicle – a more affordable model – will push the manufacturer to the brink of full capacity.
These companies will become the backbone to a force to be reckoned with.
If you liked this article, you may also enjoy: