Tesla Model S sedan to use cheap-battery strategy to be profitable

Article by Christian Andrei, on January 3, 2011

Tesla Motors Inc. says that equipping its Model S sedan with cheaper batteries will make it profitable with much lower sales than Nissan Motor Co. what is hoping to get for its Leaf car.

In an interview, Chief Technology Officer J.B. Straubel said that the $57,000 electric Model S, which uses cells that are similar to what’s used in laptops, is meant to make money for Tesla at 20,000 annual deliveries.

According to Nissan CEO Carlos Ghosn, the combined battery-car sales for Nissan and affiliate Renault SA may have to reach 500,000 vehicles annual to be profitable without government aid.

Straubel said in an interview that with Nissan’s decision to use a lithium-ion battery, the carmaker will face a cost challenge that will be “more difficult to solve.” He said that for Nissan to reach a cost point that is internally sustainable, it will need a much higher volume. Since 2008,

Tesla has delivered $109,000 rechargeable Roadsters, which are powered by thousands of small lithium-ion cells similar to those used in portable computers. To date, Tesla has yet to post an annual profit.

The Silicon Valley startup believes that in the foreseeable future, these cells will be more cost-effective than the larger lithium batteries in the Leaf and General Motors Co.’s $41,000 plug-in Volt. Sales of both the Leaf and the Volt have recently started.

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