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Why Couldn’t Tesla Motors Inc (TSLA) Just Swap Batteries?

3. It could leave the car design unchanged and retrofit a completely new battery with the same form, fit, and function of li-ion– however, depending on the makeup of the battery, that could negatively affect optimum performance.

But no matter how you break it down, there has to be a redesign somewhere, and that spells cost.

For a large company like Toyota Motor Corporation (ADR) (NYSE:TM) or General Motors Company (NYSE:GM), that cost is something they can afford. However, Tesla is not on the scale of Toyota Motor Corporation (ADR) (NYSE:TM) or General Motors Company (NYSE:GM). In fact, until recently, Tesla had a net loss every quarter since the company’s inception, which through last Dec. 31 accumulated to a total net loss of $1,065.6 million. Furthermore, Tesla’s recent profits are largely due to the Model S. That’s one car. Yes, it’s an absolutely beautiful car, and a technological masterpiece, but Tesla’s business model is dependent on widespread acceptance of the Model S, as it intends to use those profits to develop the Model X. What this basically boils down to is that Tesla may not have the necessary resources for a new battery.

Can’t Tesla get new battery cells from Panasonic Corporation (ADR) (OTCMKTS:PCRFY)? The short answer is yes. But that doesn’t negate the need for research and development. Panasonic Corporation (ADR) (OTCMKTS:PCRFY) and Tesla have a history of partnering in battery design, But that’s exactly what it is — a partnership. It’s not all Panasonic footing the bill. Further, a partnership would rely on Panasonic’s desire to make a li-air battery for Tesla. Although I think it’s highly likely it would, how much that’d cost Tesla is uncertain.

A look into the future
Future technological advances in batteries is a risk to Tesla because of the cost involved. Could Tesla switch to a new battery? Of course. Did I say it couldn’t? No. But given Tesla’s recent profitability after 10 years of net losses, the cost that battery could require would probably hurt Tesla’s bottom line — whether it’s a little or a lot. Therefore, it could also hurt Tesla’s stock price. Finally, batteries themselves may not be the future for green cars. As I’ve written before, cryogen (liquid) air powered engines are re-emerging as a possible alternative energy. They use existing infrastructures, and the technology is such that energy stored as liquid air would allow “wrong time” energy produced by wind farms, and other sources, to be stored for later use.

This is a big deal. Consequently, this is something investors would do well to monitor.

The article Why Couldn’t Tesla Just Swap Batteries? originally appeared on and is written by Katie Spence.

Fool contributor Katie Spence has no position in any stocks mentioned. Follow her on Twitter: @TMFKSpence. The Motley Fool recommends General Motors and Tesla Motors and owns shares of Tesla Motors .

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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