Is Tesla's In-House 4680 Battery a Game-Changer in the Making?

Tesla TSLA hit a major milestone in its push for battery innovation. The electric vehicle (EV) and tech titan claims that its in-house production of 4680 battery cells is now more cost-effective than sourcing from outside suppliers. This means Tesla's own 4680 batteries are now the lowest in cost per kilowatt-hour (kWh) among its supply chain partners.

The achievement is commendable given Tesla is not solely a battery manufacturer. While suppliers like Panasonic and LG Energy Solution focus entirely on battery production, Tesla has managed to surpass them in cost efficiency—all while also running its EV, energy, artificial intelligence and self-driving businesses.

Tesla has been working for several years to scale up its 4680-battery production and it has scaled it enough to achieve this cost efficiency. Last September, Tesla hit the milestone of producing 100 million cells. The 4680-cell design offers high energy density and performance benefits, making it a key part of Tesla's EVs.

Tesla is building its own lithium refinery in the United States, which could help reduce costs even further. All these developments signal that Tesla is serious about vertical integration and lowering EV costs through better battery technology.

Other EV Companies Focusing on Battery Tech

BYD Co Ltd BYDDY is one of the world's leading producers of rechargeable batteries. The company started off as a battery maker in 1995 and leveraged that expertise to support its EV business. BYD produces lithium iron phosphate batteries under its Blade Battery brand. BYD’s vertically- integrated production lowers costs and boosts efficiency.

General Motors GM is also advancing battery tech through its joint venture with LG Energy Solution. While General Motors sold its Lansing battery plant stake to LG Energy, it will continue its battery JVs in Ohio and Tennessee. These sites will produce advanced lithium-ion cells for next-gen EVs. GM’s supply deals for lithium, nickel and cobalt ensure stable access to essential battery materials.

TSLA’s Price Performance, Valuation and Estimates

Shares of Tesla have lost around 42% year to date compared with the industry’s decline of 37.5%.

From a valuation standpoint, TSLA trades at a forward price-to-sales ratio of 6.82, above the industry. It carries a Value Score of F.

The Zacks Consensus Estimate for TSLA’s earnings has been southbound over the past 30 days.

Tesla stock currently carries a Zacks Rank #3 (Hold).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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