Electric Car Builder Tesla increases Battery Order by 900%

Posted by PITHOCRATES - November 2nd, 2013

Week in Review

Say’s law states that supply creates its own demand.  Think of some of the greatest inventions in our life and you’ll see that Say’s law is true.  Today’s kitchens aren’t complete without a microwave oven.  Yet we didn’t demand a microwave oven.  Because we had no idea what it was until someone created it.  And told us how wonderful it was.  Then we started buying them.  The supply of microwaves came first.  The demand then followed.  Hence, supply created its own demand.  Just like Say’s law states.  You know who else believes in Say’s law?  Elon Musk.  The guy who founded PayPal.  SpaceX.  And Tesla Motors (see Tesla boosts battery order from Panasonic by Reuters posted 10/30/2013 on The Globe and Mail).

Tesla Motors Inc. will sharply increase the number of lithium ion battery cells it receives from Japan’s Panasonic Corp, in a deal that underscores the U.S. car maker’s confidence in the future of all-electric cars.

Electronics maker Panasonic, already Tesla’s primary supplier of lithium-ion batteries, will provide nearly 2 billion lithium ion cells to the car maker in the four years to 2017, the two companies said on Wednesday.

That is a big step-up from the 200 million cells Panasonic is expected to have supplied to Tesla in the two years ending this December.

The deal shows Tesla’s faith in its models despite slower-than-expected global sales of electric vehicles.

Going from 200 million to 2 billion?  That’s an increase of 900%.  It’s one thing to have faith and believe in your product.  Believing that your supply will create demand.  But there is another economic concept that may be pertinent here.  One from the Austrian school of economics.  Malinvestment.  Taking advantage of cheap capital and government subsidies to make bad investments.  Hence malinvestments.  For it is unlikely that any business is going to see a 900% sales growth in the coming year let alone the narrow niche market of electric cars.  Even Jean-Baptiste Say himself would probably say that’s some pretty wishful thinking that a 900% increase in supply will generate a corresponding demand.

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