Elon Musk hopes to half Tesla battery prices within three years

Tesla CEO Elon Musk has vowed to halve the price of the batteries used in their cars as they push towards the goal of making an electric car with the price tag of around $25,000 (€21,370), on par with traditional combustion engine vehicles.

"Battery Day" lays out Musk's gameplan to help squeeze costs out of every aspect of battery production and to help raise the productivity of his workforce. It includes a deeper level of vertical integration that will take the American company into all stages of manufacture, including processing the raw materials needed, to saving costs on sourcing lithium by buying deposits instead of the refined element.

He claims the advances will yield a 54% increase in range, a 56% decrease in dollar per kilowatt-hour pack price and a significant decrease in capital investment required for manufacturing.

This comes as shares in Tesla have risen throughout the year fueled by Musk's promises of groundbreaking advances.

However, stocks dropped by 7% after a trading session on Tuesday, following a previous drop of 5% earlier the same day following the Tesla CEO's announcement of "difficulty scaling the production of new technology."

Experts have largely supported the plans to reduce battery prices, although they were divided on how significant the developments would be enabling Tesla to maintain their advantage over the market.

Musk announced the advancements could take in excess of a year, with him claiming they could achieve their goal within three.

Musk hopes these innovations could enable Tesla to have a truly affordable car.

He added: "One of the things that troubles me the most is that we don't yet have a truly affordable car. That is something that we will make in the future."

Pierre Ferragu, an analyst at New Street Research described the plan as an "insane innovation."

He said: “They’re demonstrating they’ve got a path to maintain their lead for the next decade. Tesla was so confident others could not catch up that it had taken the unusual step of being completely open about its technical plans."

Other analysts are less enthusiastic about the changes, with some claiming they were far less groundbreaking than Tesla made them out to be.

Others are worried that changing the chemistry of the batteries - more silicon in the anodes and more cobalt in the cathodes - would lead to only incremental change. Musk claims the new anode would cut costs by 5% and increase range by 20%, with the new cathode cutting costs by a further 15%.

After addressing shareholders at Tesla's annual meeting, Musk admitted that significant changes to their production were needed to tackle climate change.

He said that declining costs were pushing the cost of electric cars closer to the mainstream but admitted companies had to work faster.

On Tuesday Musk announced the plans to manufacture cells for the batteries in-house, in a break from tradition. Tesla had previously built its business off a partnership with Panasonic, however, they will still purchase cells from the Japanese electrics company due to the high volume needed to meet their goals.

Tesla is due to ramp up production to a 10 gigawatt-hour factor in Fremont for its new cell design, but Musk admitted it will take a year for production to ramp up to full.

In total, Tesla will produce 100 gigawatt-hours of cells by 2022, ramping up to 3 terawatt-hours by 2030.

In addition to manufacturing cells in-house, other improvements Musk noted were changes to the manufacturing process, such as removing the solvent step, which requires significant investment and heavy machinery and replacing it with a dry process.

Tesla has also secured mining rights to a 10,000 lithium deposit in the US.

If these measures are implemented properly, it could significantly streamline Tesla's production and insulate them from criticisms about the human costs involved in sectors such as mining and production.

Musk has previously come under fire for violating labour laws, including not allowing workers to unionise and maximising crunch time in his factories.

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