Bull Vs. Bear Debate: Does Tesla Have A Battery Problem?

With the hype surrounding Tesla Inc's TSLA battery day dying down, the sell-side is divided over the viability and technological advancement of the company's battery technology.

The Tesla Bull Case: Tesla's plans to reduce battery pack costs by about 50% are a jaw dropper, trimming cell prices from $150/kilowatt-hour now to well under $100/kWh, Wedbush analyst Daniel Ives said following the company's Battery Day.

"As Tesla further executes on this EV vision, this would enable the company to significantly reduce its battery expenses and ultimately see more margin leverage as well as cheaper future Teslas rolling out on the road to consumers," the analyst said. 

The Tesla Bear Case Tesla's reported interest in picking up a stake in South Korean battery supplier LG Chem raises eyebrows regarding how advanced its own battery technology is, said Tesla bear Gordon Johnson. 

The 10% LG Chem stake Tesla is reportedly interested in acquiring for about $3 billion to $5 billion suggests the company would need to commit a lot of capital — even as it has capital needs to build its battery manufacturing vision, Johnson said.

This would mean another Tesla capital raise could be in the offing, he said.

Additionally, Tesla could be muscled out of battery supplies by larger rivals, which brings up the possibility of losses this year and the next, Johnson said.

Volkswagen AG VLKAF has secured enough battery supply for 4.5 million battery electric vehicles through 2023, the analyst said.

Assuming each of the German company's battery EVs has a 70/kWh pack, it would be 315 gigawatt hours of supply, or about 75% of the planned capacity of LG Chem and CATL put together, he said. 

Besides Volkswagen, 15 other major OEMs have likely secured battery capacity, leaving Tesla in the lurch, Johnson said. 

Tesla's sudden scramble could be reflecting a scenario of battery demand outstripping supply, the analyst said.

TSLA Ratings: Wedbush has a Neutral rating on Tesla shares, with base price and bull case price targets of $475 and $700, respectively.

GLJ's Johnson has a Sell rating and $19 price target.

TSLA Price Action: Tesla shares were trading 2.07% higher at $427.75 at last check Wednesday. 

Related Links:

How Tesla's Chinese EV Market Is Worth $400 Per Share

Tesla Bear Names 7 Reasons Why Stock Failed To Make The Cut For S&P 500

Photo courtesy of Tesla.