The first mass-produced electric vehicles appeared in the U.S. in 1902, introduced by Studebaker, the world’s largest manufacturer of wagons and buggies at the time. While electric vehicles of the time had some key advantages over early gasoline-powered cars, which emitted particularly noxious fumes and were prone to deadly explosions, the first battle between gas and electric cars didn’t last long. The economics of gas cars proved far superior to electric cars, as the advent of Henry Ford’s Model T assembly line in 1913 dropped the price of gas cars to less than half of electric cars, and the discovery of cheap oil in Texas, Oklahoma, and California made filling up the gas tank far cheaper than charging the electric car’s primitive lead-acid battery. Not surprisingly, consumers opted for efficiency and convenience, and the gasoline car became ubiquitous, shaping the world as we know it today.
However, electric vehicles attracted renewed interest in the late 20th century as emissions from the ever-expanding fleet of gasoline cars were linked to climate and public health crises. In addition to the 1960’s introduction of the U.S. Clean Air Act, which mandates increasingly stringent controls on vehicle engine technology and reductions in tailpipe emissions over time, the California Air Resources Board introduced a Zero-Emissions Vehicle (ZEV) mandate in 1990, requiring major automakers to phase in ZEVs over time. While lobbying in the background to overturn the mandate in federal court, the major OEMs produced limited numbers of EVs for California drivers to comply with the law while it was still on the books. Most OEMs created electric versions of existing models, but General Motors’ EV1 was designed as an electric vehicle from inception and became the first mass-produced electric vehicle of the modern era. Later versions introduced a Nickel Metal Hydride (NiMH) battery, which significantly reduced the car’s weight and increased range over the original lead-acid battery version from 60 miles to 105 miles in one charge. Although the revolutionary vehicle seemed to win the hearts of the lucky few who were able to navigate the curiously complicated process of buying one, the program was seen as a money pit by GM executives, due to the high cost of batteries and initial production. Once the ZEV mandate was rejected by a federal court, the Company discontinued the program, took back the cars as the leases expired and crushed them (Highly recommended viewing: Who Killed the Electric Car? EV1 Documentary).
Tesla was started in response to the cancellation of the EV1 program in 2003. As the major OEMs mothballed their EV R&D and pushed hydrogen vehicles as a better alternative (arguably because they knew it was less likely to succeed and disrupt their legacy business), the only way to continue to push forward EV technology was to start a new automotive company, a notoriously difficult venture that had not been successfully attempted in the U.S. for almost a century. However, the willful neglect of the major OEMs to advance EV technology created a window of opportunity for Tesla to carve out a durable competitive advantage by taking the next logical step in automotive battery tech and developing a proprietary battery management system around lithium-ion cells, which not only gave them a fighting chance at survival but may ultimately cement their dominance in a new era of transportation.
Tesla was the first company to use lithium-ion batteries in electric cars. While lithium-ion batteries had greater density and thus held promise for far superior efficiency, performance, and cycle life than previous generations of electric vehicles using lead-acid and NiMH batteries, they were still very expensive and much more difficult to use in automotive applications. Li-ion encompasses a variety of chemistries and form factors with trade-offs around space utilization, cost, density, safety, and longevity. As the first mover in the EV space to use Li-ion, Tesla had the luxury of choosing the best cells for the job, with an eye toward cost and density as well as the potential for improvements over the long run. Tesla ultimately selected Panasonic 18650 cylindrical NCA (Nickel-Cobalt-Aluminum Oxide) cells, which offered an “exceptional combination of cycle life and energy density” (A Bit About Batteries | Tesla). Safety was another key consideration and is one of the biggest advantages over prismatic or pouch cells, as cylindrical cells are designed to rupture if the internal pressure grows too high, mitigating the safety risks from fires or explosions. The cylindrical cells were also the cheapest and most commonly available for use in consumer electronic applications such as laptop computers, as the standardized form factor allowed for faster production and thus lower cost per kilowatt-hour (Lithium Batteries: Cylindrical Versus Prismatic).
The battery pack of the 2008 Tesla Roadster contained 6,831 individual Li-ion cells operating in parallel. The high number of small cells was ideal for limiting the impact of any one cell failure on the overall pack; it was also ideal for cooling as there was more surface area for heat dissipation than there would be with a smaller number of larger prismatic cells. One of Tesla’s key inventions to maximize battery lifetime was a sophisticated liquid cooling system that maintains a favorable temperature for the cells, even under extreme ambient conditions (like you might get from parking in the sun in Abu Dhabi, from recent personal experience). The 53-kwh battery packed roughly twice the power of the EV1’s NiMH battery while weighing slightly less. Together with the Company’s proprietary power electronics, software and motors (which will get their own chapter), the battery management system was capable of delivering enough power to accelerate the Roadster from 0 to 60mph in 3.9 seconds and travel for more than 240 miles in one charge, well in excess of any production electric vehicle capabilities up to that point. Beyond creating a new standard for electric vehicles, the Tesla Roadster stood in a league of its own pushing the boundaries of automotive propulsion, with vastly superior well-to-wheel efficiency and significantly lower carbon emissions than any other technology on the road:
While this performance was good enough to cover 99% of drivers’ daily needs on a single overnight charge, the obvious drawbacks were high cost and lack of cell production capacity. Learning from GM’s premature and costly foray into mass-market EVs, Tesla determined that the best course of action was to first launch a premium sports car and then follow with progressively more affordable models as cell production ramped and the cost of Li-ion cells decreased. Industry cost declines to date have predictably followed Wright’s Law, which observes that for every cumulative doubling of production for a given manufactured good, the cost will fall by a fixed percentage, depending on the product and the industry.
Although Tesla sold only 1,000 units of the $109,000 Roadster by January 2010, its impact on the industry was profound. The Roadster’s performance and efficiency led the major OEMs to jumpstart their electrification programs, and electric models started hitting the market again, starting with the Nissan Leaf (which debuted with only 73 miles of range) in December 2010. Bob Lutz, then the vice-chairman of GM, attributed this newfound urgency entirely to Tesla, saying in 2009:
“All the geniuses here at General Motors kept saying lithium-ion technology is ten years away, and Toyota agrees with us—and, boom, along comes Tesla. So I said, ‘How come some teeny little California start-up run by guys who know nothing about the car business can do this, and we can’t?’ That was the crowbar that helped break up the logjam.”
By the time it IPO’d in July 2010, it was clear that Tesla’s first-mover advantage and sole focus on electrified transportation had enabled it to take the lead in harnessing the power of lithium ion batteries for automotive applications, but the competition definitely took notice. In Part II, I will explore how Tesla has been able to maintain and arguably widen their lead in battery technology, despite intensifying competition over the past decade, by deepening their involvement in battery cell design and manufacturing.
Visit The Money Corner for more content like this!
