What makes Tesla’s batteries so great?

Even casual followers of the auto industry know that the Tesla Model S offers more than double the range of any other electric vehicle on the market. How has Tesla achieved this? The answer lies in their fundamental battery strategy.
TESLA 18650 battery drive test

Tesla Motors is the first automaker to build an all-electric vehicle that can truly replace legacy gasoline cars. While other automakers produce low-range urban electric vehicles or plug-in hybrids, Tesla’s Model S is more than capable of driving across the country without a drop of gasoline. What makes Tesla different?
The obvious answer: a bigger battery
A casual observer might roll their eyes at the question. It is obvious, is it not? While cars like the BMW i3, Ford Focus Electric, and Nissan LEAF offer batteries of 19 kWh, 23 kWh, and 24 kWh respectively with all-electric ranges less than 85 miles, the Tesla Model S comes with a choice of 60 kWh or 85 kWh for a range of 208 or 265 miles (or more with all-wheel drive). Though the added weight of the extra capacity comes with an efficiency penalty, more battery means more range. Simple as that.  
tesla-superchargertesla battery
Or is it that simple?
Not quite. The missing factors are packaging and cost, and this is where Tesla truly shines. Designing an electric vehicle from the ground up meant that Tesla could almost literally do whatever it wanted – without the hindrance of a conventional ICE platform or traditional engine and transmission, the automaker was free to build the entire vehicle around the battery. The result was a flat slab that forms the floor of Model S, which enables a very large battery without sacrificing interior space. (The i3, also designed from a clean slate, employs a similar strategy). In fact, the interior volume of Model S is outstanding by all accounts.
tesla models
Granted, the vehicle is much larger dimensionally than the aforementioned compact hatchbacks, but with a conventional architecture there is simply no room for 60 or 85 kWh of battery capacity at today’s energy densities. Witness the Toyota RAV4 EV, an SUV that could only reasonably fit 42 kWh of Tesla batteries. There is also the question of aerodynamics – Tesla’s Model S excels in highway driving due to one of the lowest drag coefficients (0.24) of any production car. A less aerodynamic vehicle with the weight of a 60- or 85-kWh battery likely would not achieve the same range.  
Industry-leading battery pack costs
Battery costs are notoriously hard to estimate in the electric vehicle industry for several reasons. Automakers and battery makers keep their mouths shut, and though costs drop every year the reductions are not reflected in the vehicles right away, as the battery packs in the cars themselves are not updated every year.
tesla-tesla battery
Future projections of battery costs vary widely, but Navigant Research (one of the most trustworthy sources) estimated industry costs at $500/kWh at the cell level in 2013 and projected reductions to $300/kWh by 2015 and $180/kWh in 2020. These estimates do not include the costs associated with the other components that make up a battery pack, such as electronics, cooling, and enclosures. Navigant’s numbers are somewhat confirmed by Ford CEO Alan Mullaly’s admission in 2012 that the Focus Electric pack at the time cost between $12,000 and $15,000, or $520 to $650 per kWh at the pack level. Given that Ford’s cells are supplied by LG Chem, who also supplies the Chevrolet Volt, it is reasonable to expect Volt prices were similar but somewhat lower due to greater volumes.
The Ford Focus Electric is still using that same pack, with a next-gen version due in 2016. Both the Chevy Volt and Nissan LEAF have recently had minor updates to their batteries, though, so it is likely that their costs reflect the currently industry standard.
At the moment, that likely means something in the vicinity of $400-$450/kWh at the pack level, which would translate to about $6,800-$7,650 for the 17-kWh Volt pack and $9,600-$10,800 for the 24-kWh LEAF. Tesla, on the other hand, is achieving 18650 battery pack costs in the range of $240-$280/kWh by most well-educated estimates. CTO J.B. Straubel confirmed those numbers last year, in a roundabout way, by asserting that the Model S battery makes up “less than a quarter of the cost in most cases.” This “most cases” likely refers to the standard 60- and 85-kWh models rather than the top-of-the-line P85 performance version.
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