Tesla Motors Inc (NASDAQ:TSLA) is the hottest stock on the market right now, and the company is only expected to go up from here. Problems may start to rise in the company’s supply chain as Thomas Fisher over at Green Car Reports points out. Tesla may soon push the world’s supply of lithium ion batteries to its limit.
According to the piece, Tesla Motors Inc (NASDAQ:TSLA) may double pre-Model S demand for ‘18650’ lithium-ion cells by 2015, if it keeps up with estimates and is producing around 40,000 cars that year. The massive increase in demand demonstrates one of the many challenges that face the company as it seeks to expand.
Tesla scale challenges
Scale is everything for Tesla Motors Inc (NASDAQ:TSLA) right now. The company has shown that it can make a fantastic electric car, and that it can make a profit selling it, but it has yet to demonstrate the ability to bring the electric car to the mass market. In order to become a big player in the car market Tesla is going to have to scale awesomely. Its unique parts demand brings unique challenges.
The battery that Tesla Motors Inc (NASDAQ:TSLA) uses in its Model S are normal 18650 cells, the kind used in many laptop batteries. Tesla sources most of its batteries from Panasonic, and the company has done well from the increased sales of the Model S. Panasonic has decided to increase its production capacity, betting on great performance at Tesla.
Supply chain problems are likely to be a big headache for Tesla Motors Inc (NASDAQ:TSLA) going forward. Elon Musk isn’t in charge of everything. He needs Tesla’s supply partners to up their game just as quickly as the market increases its demand.
According to Mr. Fisher, if Tesla Motors Inc. (NASDAQ:TSLA) is planning on selling 100,000 vehicles in 2017 it will need to see a doubling of the entire production of 18,650 batteries in order to power the vehicles. If the company wants to scale production as fast as it can, it will need to build its own factories.
That means getting started now. As Fisher states, it took Nissan three years to get its lithium-ion plant up and running. If Tesla Motors Inc. (NASDAQ:TSLA) does scale, it will become the dominant force in global battery supply.