Why Tesla's Battery Day Was a Major Flop

After months of fervent speculation surrounding “Battery Day,” the much-anticipated and hyped-up Tesla (NASDAQ: TSLA) event teased by Elon Musk for months, the market has been left, well, disappointed.

Tesla’s share price dropped ~8% on Wednesday, shedding roughly $30 billion in value from the automaker as investors came to grips with an underwhelming reality: Not only did Tesla not have anything truly groundbreaking up its sleeve, but it would take another two years to get what minimal improvements it was making into production.

Simply put, Tesla’s Battery Day was a major flop.

Now, there are a few reasons Tesla’s presentation ended up feeling so lackluster. One reason is simply that it did not meet the enormous expectations set up by the company and its fan base. 

In an earnings call leading to the event, Elon Musk was rather colorful in his teaser statement saying, “Battery Day people. Wait until Battery Day. It’s gonna blow your mind. It blows my mind, and I know it!”

And in response to a Teslerati.com story suggesting that Tesla’s battery announcement could be “more insane than expected,” Musk Tweeted out a comment saying, “It will be very insane.

Statements like these are entirely safe for Elon to put out there because they don’t say anything concrete. There are no specific claims involved, but it provides enough ammo for the die-hard bulls to speculate blue-sky scenarios. The narrative heading into this week was that whatever Tesla was about to announce was going to make the rest of the auto industry obsolete but this obviously did not happen.

Another reason for the resounding disappointment was the lack of any tangible evidence of Tesla’s new battery technology. Perhaps the company has decided to move away from live demonstrations after accidentally smashing the “bulletproof” windows of its Cybertruck, but whatever the reason, we were left with nothing but a slide deck. 

As for what that slide deck showcased, Tesla plans to produce its own “tabless” batteries, which will ultimately increase range by 16% according to the company. This is a solid improvement, there’s no doubt, but it is nothing truly groundbreaking for the automotive industry.

Tesla also made a few more promises with no timelines attached. The company plans to build a new cathode plant and will eventually stop using cobalt in its cathodes. Tesla also dropped a $25,000 price tag as its next goal for affordable electric cars. The market can take that claim with a grain of salt, considering Tesla has yet to deliver on even a $35,000 EV. A bare-bones Model 3 currently still retails at $38,000. 

Other than that, there wasn’t much for Tesla to boast about on Battery Day. We’re effectively looking at a 16% range increase by 2022 and some undefined promises about cost reductions. That’s it.

Meanwhile, battery technology continues to develop outside of Tesla’s own research and development arm, as the broader automotive industry aims to transition away from the combustion engine. Unfortunately for Musk, at least one of these developments now threatens to leapfrog Tesla and challenge its status as the de facto electric vehicle innovator.

Did Elon Poke the Bear?

Elon is known to occasionally put his foot in his mouth, a habit that has sparked public battles with the SEC and, more recently, with politicians like Bernie Sanders. One rivalry you might not be familiar with, though, is Elon’s beef with Bill Gates. 

Throughout 2020, the two billionaires have traded barbs in various interviews and on social media. The disagreement reached a peak earlier this year when Gates suggested we would need an alternative solution to electric vehicles for long-haul vehicles and opted for an all-electric Porsche Taycan. Musk seemed to take this personally and responded by saying that Gates has “no idea” what he’s talking about and claimed that his “conversations with Gates have been underwhelming.”

Gates has had his own slights to make about Elon, effectively telling him to stay in his lane on the COVID-19 issue and, more recently, saying that Elon Musk is no Steve Jobs. Clearly, the two tech moguls would like to take each other down a peg. As one might expect, there’s a lot of ego that comes with being the second and third richest people on the planet.

There may be more to these public jabs, though, than meets the eye. Behind the scenes, Bill Gates is funding a new battery technology company that has amassed 200 patent,s with the potential to make even Tesla look like it’s behind the times. 

Specifically, Gates is funding a soon-to-be-public battery maker that says it can increase the distance EVs can travel on a single charge by 50%. Not only does this technology extend range, but it also improves safety and cuts the charging time of batteries to less than 15 minutes. 

Next to Bill Gates, Kleiner Perkins and Khosla Ventures have already put tens of millions into that startup. The largest investor, however, is direct Tesla rival Volkswagen, which has ~$300 million in financial commitments to the company.

Of course, claims in slide decks should always be viewed with a degree of skepticism, but the technology this company is producing, solid-state lithium-ion, is widely regarded as the next major leap in electrification. We’ll have a report on that technology in the near future, so be sure to keep an eye out as we parse out the details.

Until next time,

Jason Stutman

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