It’s a critical moment for Tesla now, as Elon Musk seeks to crack the code on making better, cheaper batteries.
The electric car maker is recruiting materials suppliers in China and South Korea to help lower costs and boost the energy of its latest batteries, according to people familiar with the matter, even as the company grapples with battery-related performance and production issues that have delayed the launch of its futuristic Cybertruck.
According to sources who asked not to be named, Tesla has hired China’s Ningbo Rongbai New Energy and Suzhou Dongshan Precision Manufacturing to help cut material costs while increasing production of 4680 batteries in the United States.
Details of these arrangements have not been previously reported.
If the Austin, Texas-based electric car maker can resolve performance and process issues and meet its ambitious production goals, the 4680 could end up being the key, rather than the bottleneck, to CEO Musk’s dream of producing 20 million vehicles per year by 2030.
Tesla and Musk could not be reached for comment.
As part of its efforts, Tesla also signed a deal with South Korea’s L&F Co to supply high-nickel cathodes that could increase the energy density of its 4680 batteries, one of the sources said.
The automaker aims to increase its own production with 4680 batteries from South Korea’s LG Energy Solution and Japan’s Panasonic, an insurance policy to ensure future electric vehicle production, two sources said. LG and Panasonic are expected to supply batteries for the Cybertruck, one of the sources said.
Musk told investors in early March that battery shortages meant “factory shutdowns.”
The new batteries are expected to play a key role in the avant-garde stainless steel Cybertruck due later this year, the company’s first new model in more than three years.
Sources said Tesla had considered three battery options to ensure the launch wouldn’t be delayed again: the smaller 2170 cells widely used in other Tesla models, the 4680 cells and the cheaper lithium iron phosphate cells, but the electric carmaker preferred to wait until the 4680 cells were ready.
Details about Tesla’s Cybertruck battery strategy, including using 4680 cells and considering other options, have not yet been reported.
In 2022, Musk said he didn’t expect the 4680 battery to be a “limiting factor on the Cybertruck or anything else.”
The Tesla-designed 4680 battery, named for its external dimensions (46 mm in diameter and 80 mm in length), is critical to future production plans. Tesla intends to produce versions at its factories in Texas, California, Nevada and Berlin for vehicles ranging from the Model Y to the Cybertruck, sources said.
But Musk admitted at Tesla’s Investor Day on March 1 that Tesla is still working to increase the first wave of production.
Tesla’s impact is underestimated
Despite the looming problems, some analysts remain optimistic that Tesla will solve them.
“While execution risks remain and many details are unclear, Tesla’s impact on the global battery industry may remain underestimated,” Morgan Stanley said after the investor day.
Musk first announced the new battery at Battery Day in September 2020. At that event, he promised to reduce battery costs by 50% through a series of innovations, from larger battery sizes to a new “dry” electrode coating process that can significantly reduce the size and cost of battery factories while improving battery performance.
Repeated delays in moving the new battery from the initial prototype stage to full production have also delayed the long-awaited launch of the Cybertruck, which was designed to take advantage of the battery’s potential improvements in energy density and power that have yet to materialize.
But it will take time for suppliers to ramp up production.
Panasonic is running a 4680 pilot production line at its Wakayama plant in Japan and plans to start mass production later in the fiscal year ending in March 2024.
Panasonic Energy Chief Technology Officer Shoichiro Watanabe said last month that the company’s new battery factory in Kansas will initially focus on producing 2170 cells, but will eventually move 4680 production to North America.
Last year, LG said it planned to open a new 4680 production line at its Ochang factory in South Korea in the second half of 2023.
Relevant sources said that the first-generation 4680 batteries produced at Tesla’s Fremont, California, factory failed to meet energy density targets.
The automaker has so far been able to dry-coat the anode (negative electrode) but is still having problems dry-coating the cathode, where it is expected to see the most significant gains, sources said.
Musk and company executives said Tesla’s attempts to increase output from the dry-coating process have so far produced only about 50,000 cars a year.
Musk said that by 2020, Tesla will have enough internal 4680 production capacity to supply 1.3 million Model Y units.
Although executives said Tesla appears to be able to quintuple its production of 4,680 vehicles by the end of the year, the company is still hedging.
Musk is betting that if Tesla has too many batteries this year, that will be a good problem. It could use these in energy storage systems sold to utilities and consumers.
Tesla has also been installing first-generation 4680 cells with “wet” cathodes in so-called structural packs in Model Ys produced in Texas. Most of these vehicles use older 2170 batteries.
Tesla plans to use a cathode containing more than 90% nickel in its next-generation 4680 battery, two sources said. Another source said L&F is expected to be one of the suppliers of the high-nickel cathode.
© Thomson Reuters 2023
