How Tesla Motors, Inc. Plans to Stay Ahead In Batteries

By Daniel

Leadership is important for any business, but it's especially key to fast-growing businesses in evolving industries. This is why when Tesla Motors CEO Elon Musk speaks, many investors are quick to devour his words. While it's certainly possible to overanalyze or overthink words of a public figure like Musk, it's at least worth occasionally checking in on what the visionary leader is thinking and communicating.

Tesla CEO Elon Musk. Image source: Tesla Motors.

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One of the CEO's most recent appearances was at the 2015 Baron Investment Conference. Here are some of the most insightful takeaways from Musk's interview, including a key update on Tesla's progress to reduce the costs of its batteries and a reminder about the superior safety of its vehicles.

Tesla's battery advantageMusk recently told investors that Tesla didn't think "anyone is on a path to be even close" to the electric-car maker when it comes to reducing costs to build its batteries. But does Tesla believe it can maintain this position as competition begins to build more electric cars?

Tesla's rapid rollout of fully electric vehicles with 200-plus miles, alongside the construction of the world's largest battery factory, is positioning the company to lead in battery innovation, according to Musk.

When asked about what's driving innovation in Tesla's batteries and whether it worries about its batteries suddenly becoming obsolete, Musk said Tesla believes the electric-car maker would be approached with any innovations or breakthroughs before anyone else.

"We have quite a good understanding of all the battery technologies in the world," Musk explained during the interview.

He continued:

Musk went on to explain that Tesla tracks about 60 developments around the world to make better batteries. Tesla rates these efforts on scales of one to five and Musk says there are a few threes but no fours.

"Four means we should be in, like, preliminary discussions," Musk explained.

Reducing battery costs Key to Tesla's success in successfully producing and marketing its planned lower-cost model, Model 3, is reducing the cost of the batteries used in Tesla vehicles by approximately 30% per kilowatt-hour. When asked about Tesla's efforts to make this happen, the CEO was as confident as ever.

Illustrating how extreme Tesla is taking its efforts to benefit from economies of scale, Musk described the Gigafactory as having railcars from the mines rolling directly into the factory on one side and completely finished battery packs coming out the other.

Rendering of Tesla's currently under-construction Gigafactory. Image source: Tesla Motors.

Musk went on to say that Tesla remains "very confident" it can achieve the 30% cost reduction per kWh needed to build and sell the Model 3.

Tesla vehicles are fundamentally saferMusk emphasized the safety of Tesla vehicles during the interview, noting that Model S still holds the record for having the lowest probability of injury of any vehicle tested by the National Highway Traffic Safety Administration.

"Safety was our absolute paramount goal [when designing Model S]," Musk explained. "The whole car is architected for maximum safety."

But the safety of Model S is more than a matter of priorities.

"We have physics on our side," he added.

Model S front trunk.

The way Tesla vehicles are designed give them inherent safety advantages, including a larger front crumple zone and greater load transfer in side collisions thanks to the rectangular battery positioned across the floor of the vehicle, Musk explained.

While most of the material in the interview has already been discussed by Musk, the most notable takeaway was probably how the company thinks about its advantage as a leader in building fully electric, long-range vehicles, as well as the optimistic update from the CEO on efforts to reduce the costs of its batteries.

The article How Tesla Motors, Inc. Plans to Stay Ahead In Batteries originally appeared on

Daniel Sparks owns shares of Tesla Motors. The Motley Fool owns shares of and recommends Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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