For Tesla, CATL’s unveiling of its new ‘Qilin’ Battery that can deliver 600+ miles of range to EVs is great news indeed. Does it mean Tesla markets China’s idea? Tesla has been an American Innovation upstart. Along with feeling pride, American investors have made Tesla, a trillion-dollar company. It has made Tesla’s CEO Elon Mask the world’s richest person. But what has Tesla been aiming for? Tesla has been after the idea of reinvention the automobile—turning it into an electric vehicle. Hence, it is in the mission to create a market of electric vehicle ideas.
But where is the novel idea? This is in the battery pack. Has Tesla or any other American company been producing ideas and integrating them into batteries? Unfortunately, No. Instead, Tesla started the journey out of the battery idea of Japanese Panasonic. But lately, Tesla has taken refuge in China’s CATL for the strategic battery supply. Unlike Tesla, CATL has been in the mission of advancing, producing, and commercializing battery ideas. Does it mean that Tesla has been burning money from American investors to create a market for China’s idea?
Tesla Markets China’s Idea Worsen America’s Worry:
There is a widespread belief that US politicians are scared of China’s rapid rise in innovation edge. There have been accusations that China has been making progress out of “stealing” America’s ideas. Hence, Washington chose to force U.S. technology Startups and venture firms to avoid China. Subsequently, the US Senate overwhelmingly passed legislation, in June 2021, for pouring nearly a quarter-trillion dollars to counter China’s innovation uprising. This is the money for scientific research and development for creating and commercializing a Flow of Ideas to bolster the USA’s competitiveness against China. The 68-32 vote reflected the sense of urgency about the need to counter Beijing’s attempt to sharpen the industrial edge out of technological ideas.
China’s Desperation to be an Idea Exporter:
On the other hand, China has been desperate to create economic value in the industrial economy out of ideas. Upon becoming the world’s factory out of imported ideas, China has already exhausted its labor and natural resources to create Wealth. Hence, China’s growth has been slowing down. To meet the dream of keep growing, China must turn to the prospect of creating economic value out of ideas. In this mission, China has already accelerated its R&D spending, leading to skyrocketing performance in publications and patents. It’s now time for China to graduate from idea importer to exporter.
Hence, China has come up with Made in China 2025 strategy. It’s the strategy of creating an idea economy by reinventing existing products. Among several significant products, China has targeted automobiles. China has embarked on automobile reinvention after failing to make an innovation edge in manufacturing gasoline automobiles in partnership with foreign firms.
Tesla’s Disruptive innovation Journey without Proprietary Vital Technology Core:
Although China’s groundwork for automobile reinvention is primarily invisible, we are bombarded with Tesla’s electric vehicle rollout. Instead of developing a proprietary technology core, in 2003, USA’s upstart Tesla embarked on an electric vehicle (EV) idea out of the integration of Lithium-ion batteries made for laptop computers. Furthermore, upon joining Tesla and becoming CEO, Elon Mask opened whatever the patents Tesla had about the electric vehicle. Since then, Tesla has been relying on others for the critical EV module.
Like many other great reinventions, EVs also emerged in a primitive form. The main limitation had been due to poor performance and the high cost of the battery pack. Besides, it takes too long to charge. Furthermore, the range of a single charge is still behind what you can have from a full tank of octane. Hence, the success of EVs depends on how far progress we make in improving the quality and reducing the cost of the battery. For this reason, we need a flow of ideas from the additional knowledge about storing more electrical energy in the same amount of material.
At the beginning of the EV journey, Japanese companies like Panasonic were at the edge in creating this flow of ideas. Japanese companies have been advancing lithium-ion batteries since the middle of the 1980s. They started the battery advancement journey to meet high-energy battery needs for portable gadgets, like digital cameras and mobile phones. In addition to many patents and publications, this journey also brought the Nobel prize for the Japanese. Chinese leadership understood the importance of acquiring the R&D capability to keep increasing the performance and reducing the material need for batteries for powering EVs. Hence, they embarked on attaining battery edge out of R&D. But, Tesla kept relying on outside suppliers—like Panasonic.
China’s Uprising in Battery Innovation:
With the mission of advancing batteries by R&D and manufacturing them, China’s CATL started the journey in 2011. While Tesla remained busy impressing customers with EV design and manufacturing, CATL kept advancing battery with its flow of ideas. With its root in TDK’s battery advancement competence, CATL rapidly institutionalized the competence to be globally competitive. Hence, within ten years, CATL has emerged as the world’s largest battery manufacturer for EVs. Furthermore, CATL has emerged as the lithium iron phosphate battery technology leader.
Unfortunately, upon being a trillion-dollar company, America’s Tesla could not make any headway in developing a global edge in battery for powering its great idea of EV. But this lithium iron phosphate battery technology is perceived as a critical technology to give a final push to EV to reach the inflection point of creative destruction. Hence, Tesla has no option other than to take refuge in CATL’s battery ideas.
To Succeed in Electric Vehicle–Tesla Markets China’s Idea:
Like any other great invention, Tesla’s electric vehicle started the journey at a loss. The only option of turning this loss into profit is to improve the performance and reduce the battery pack cost. So far, Tesla has been burning Investors’ money to sustain the loss-making operation and expecting battery suppliers to do the vital job. Although Panasonic has been doing a great job in keep improving the lithium-ion battery pack, that has not built enough momentum to enable Tesla’s electric vehicle to reach the inflection point.
On the other hand, incumbent automobile makers have started rolling out the electric version of their popular models. Furthermore, there is a cap on how much public subsidy Tesla can get for the sale of each vehicle. Hence, Tesla has become desperate for more attractive battery suppliers. Fortunately, Tesla found China’s CATL’s lithium iron phosphate battery technology. Therefore, Tesla has struck a deal with CATL for supplying batteries to power Tesla’s electric vehicle. This appears to be a dream come true for China.
This is a great success for China to let Tesla export China’s ideas worldwide. Upon burning billions of American investors’ dollars, it seems that Tesla has been on a mission to create a market for China’s idea. Ironically, although Tesla has been in the red since its inception, except for a few quarters, battery suppliers like Panasonic and CATL are making money out of the battery. And it has been growing. In the 3rd quarter of 2022, CATL expects a 200% profit rise. In the end, it appears that Tesla markets China’s idea.