Origins of Tesla Panasonic JV

Could you elaborate on the story of Tesla and Panasonic’s partnership? You mentioned they actually got started due to Tesla taking advantage of spare capacity at Panasonic.

Yes, this was back in about 2010 or thereabouts, when Tesla was going around trying to get battery manufacturers to join with them and invest in the Gigafactory, which is something else Tesla have pioneered that the rest of the industry is following. That was a time when there was over-capacity, particularly with Panasonic for cylindrical cells because of laptops starting to get so thin they could no longer accommodate the 18650 cells.

So, Tesla took advantage of this, they said, “We can use these cells,” and they actually innovated around that to make that work in a car?

That’s right, and they did an outstanding job. I have to give them a lot of credit because it’s not easy. I think the original one used something like 6700 or 7000 cells, whereas with the flat format, we can make it with 200-300 at one point. We’re trying to get to maybe doing it with a hundred cells, and as you can imagine, it’s quite a task to manage that large a number of cells because the variability has to be reduced in manufacturing and worked around to make sure the pack doesn’t get graded to the lowest-level cell it may have. But they’ve done quite a bit of good system engineering in making good packs using cylindrical cells.

Does the innovation in that come at the system level — the management systems and the thermal systems — or is it really the cell and in the pack, like you said?

There wasn’t much in the cell. The cylindrical cell has been made for a long time, and that hasn’t really changed very much, so it was mainly at the system level because typically, for consumer electronics, the devices use one cell, like in a cell phone, or half a dozen in a laptop, so there really wasn’t much system engineering or packaging. The battery management systems were almost trivial or primitive for consumer electronics, so doing the battery management, thermal management, the mechanical integrity of the pack for the automobile environment; that’s where there was a lot of innovation that was needed — and that Tesla did.

When Tesla was entering this market and they were building the Gigafactory, why did LG Chem say no to Tesla in terms of that partnership? Was that not interesting to you? What was your thinking around that time?

Well, because it was hard to imagine. The automotive market is notoriously difficult for start-ups or people to get into because it’s a fairly complex system and huge investments are needed. There is a lot of brand loyalty that goes into it, so it was not clear that people are going to be switching over to EVs that easily. And the Tesla equation would only work if they could get to 500,000 units of volume, which is what you would need to justify the Gigafactory of that size.