Tesla Inc on Tuesday said it is slashing battery costs to speed a global shift to renewable energy, and could have a $25,000 self-driving model available in three years or so.

CEO Elon Musk (pictured) and the head of Tesla’s power team laid out battery design, material and production innovations that combine to cut the cost per kilowatt hour by 56 per cent.

New approaches to making lithium-ion batteries for vehicles are desperately needed given the limited supply and cost, Musk said during a “Battery Day” presentation.

Tesla shares dropped about six per cent in after-market trades as investors learned the road ahead was not short.

Musk had put out word on Twitter that Battery Day announcements would be “insane”, driving high expectations.

During the presentation, Musk and energy engineering senior vice-president Drew Baglino laid out technical details of Tesla’s overhaul of making batteries, from raw materials and design to building finished cells into the very structures of cars.

Innovations, some still in development, were expected to pack more energy into battery cells, cut production costs and dramatically extend battery life.

They expected it to be several years before transformative battery making methods were being used at scale in Tesla factories.

“It was not one big thing, but a lot of little enhancements,” iSeeCars executive analyst Karl Brauer said of Battery Day revelations, explaining that they all add up to batteries that can be made faster and cheaper and provide longer vehicle range.

Innovations include using plentiful silicon in batteries in place of more expensive material and designing battery cells themselves into the very structures of vehicles, he said.

Musk and Baglino were adamant that a shift away from fossil fuels toward sustainable energy is a vital part of tackling climate change.

Baglino said: “It’s really important that we take action . . . We’re going to run out of these fossil fuels, so let’s just move to the future.”

Musk said making lithium-ion batteries cheaper and more abundant is essential to a global shift to renewable power, which is Tesla’s over-arching goal.

He said: “We are going to work our darndest to transition the world to sustainable energy as soon as possible.”

Along with making electric cars, Tesla has a battery division devoted to power cells for its vehicles, as well as storage packs for electricity at homes, businesses or disaster scenes.

Tesla makes batteries at its plants in the US and China, and is building a factory in Germany.

Lithium-ion batteries for Tesla models are made by Panasonic at the electric vehicle company’s “gigafactory” in Nevada.

Musk said in a tweet on Monday that Tesla intends to increase battery purchases from Panasonic Corp, LG Corp and China-based Contemporary Amperex Technology Co Ltd (CATL).

He said: “However, even with our cell suppliers going at maximum speed, we still foresee significant