Capacity expansion plans to support 20 mn vehicles in the long-termTesla stressed the importance of increasing battery capacity at the industry level to support clean transportation, and the company estimates that this would require about 20 terawatt hours per year (with about half for all the vehicles on the road, and half for storage).

To help meet this demand, Tesla announced that it will be manufacturing its own battery cells, in addition to continuing sourcing battery cells from existing suppliers such as Panasonic, LG Chem and CATL. The company believes that with its own cells it can achieve 100 gigawatt hours of capacity in 2022, and 3 terawatt hours by 2030.Tesla talked about a long-term target of 20 mn vehicles per year.

Recall that 500K vehicles equates to about 35 GWh of capacity, so 1.5-2 TWh could likely support Tesla’s 20 mn target. Tesla commented that it would be open to providing cells to other OEMs but also that Tesla is cell constrained and so this would be difficult to do. We believe this is consistent with our expectation that this will not be a material driver of its business for at least the near to intermediate term.

Cost reductions at the pack level of about 56% in roughly three years, enabling a $25,000 vehicle