It’s crunch time at Tesla Inc (TSLA.O), where Elon Musk is hoping to crack the code for making better, more affordable batteries.
The electric-vehicle maker is taking on Chinese and Korean materials suppliers to help cut the cost and boost the energy of its newest battery cells, even as the company grapples with battery-related performance and production issues that have helped delay the launch of its futuristic Cybertruck, according to people with knowledge of the plans.
Tesla has tapped China’s Suzhou Dongshan Precision Manufacturing (002384.SZ) and Ningbo Ronbay New Energy (688005.SS) to help cut materials costs as it increases the production of 4680 battery cells in the United States, according to the sources, who requested not to be named.
The details of these arrangements have not previously been disclosed.
If the Austin, Texas-based EV maker can sort out the performance and process kinks and reaches its ambitious production targets, the 4680 eventually could be the linchpin – rather than choke point – in CEO Musk’s dream of making 20 million vehicles annually by 2030.
As part of its efforts, Tesla also has entered a deal with Korea’s L&F Co (066970.KQ) to supply high-nickel cathodes that could boost the energy density of its 4680 cells, one of the sources said.
The automaker plans to ramp up its own output with 4680 cells from Korea’s LG Energy Solution (373220.KS) and Japan’s Panasonic (6752.T) – an insurance policy to secure future EV production, two of the sources said. LG and Panasonic are expected to provide cells for Cybertruck, one of the sources said.
A shortage of batteries means “the factories stall,” Musk told investors earlier this month.
The new battery is expected to play a major role in the launch in late 2023 of the edgy, stainless-steel Cybertruck, the company’s first new model in over three years.
Tesla had looked at three battery options to ensure that unveiling is not delayed again: smaller 2170 cells used broadly in other Tesla models, 4680 cells, and less-costly lithium iron phosphate cells, but the EV maker favored waiting until the 4680 cells are ready, the sources said.
Details about Tesla’s Cybertruck battery strategy, including the use of 4680 cells and consideration of other options, have not been disclosed.
Last year, Musk said he did not expect 4680 batteries would be a “limiting factor for Cybertruck or anything else.”
The Tesla-designed 4680 cell – so named for its external dimensions (46mm diameter, 80mm length) – is critical to future production plans. Tesla plans to build versions at factories in Texas, Nevada, California, and Berlin for use in vehicles from Model Y to Cybertruck, the sources said.
But Tesla is still grappling to boost the first wave of production, Musk admitted at Tesla’s investor day on March 1.
‘Tesla Impact Underestimated’
Despite the recent problems, some analysts remain hopeful Tesla will solve these issues.
“While execution risk remains and many details are unknown, Tesla’s impact on the global battery industry may still be underestimated,” Morgan Stanley said after investor day.
Musk initially introduced the new cell at Battery Day in September 2020. At that event, he pledged a 50% reduction in cell cost through a series of innovations, from a bigger cell size to a new “dry” electrode coating process that could significantly reduce the size and cost of a battery factory while increasing cell performance.
Frequent delays in moving the new cell from the initial prototype phase to full-scale production also have postponed the launch of the long-awaited Cybertruck, which was designed to make use of the cell’s potential improvement in energy density and power – advances that have yet to materialize.
But it will take time for suppliers to increase production. Panasonic is running a pilot 4680 production line at its Wakayama factory in Japan, and intends to begin mass production later in the fiscal year that ends in March next year.
Shoichiro Watanabe, chief technology officer of Panasonic Energy, in February said the company’s new Kansas battery plant will focus initially on 2170 cells, but it will eventually move 4680 production to North America.
In 2022, LG said it planned to start a new 4680 production line at its Ochang plant in Korea in the back half of this year. Tesla’s first-generation 4680 cells, made at its Fremont, California, factory, missed an energy density target, people involved say.
The automaker so far has been able to dry-coat the anode – the negative electrode – but is still having problems with dry-coating the cathode, where the most substantial gains are expected to be made, the sources said.
Tesla’s effort to boost production of the dry coating process has thus far culminated in enough batteries only for around 50,000 vehicles annually, Musk and company executives have said. In 2020, Musk said Tesla would have enough 4680 capacity in-house to cater for 1.3 million Model Ys.
While executives said it appears likely Tesla will be able to ramp up 4680 output five-fold by year-end, the company is hedging.
Buy Crypto NowMusk is betting if Tesla winds up with too many batteries in 2023, which is a good problem to have. It can use those for the energy storage systems it supplies to utilities and consumers.
Tesla also has been installing first-generation 4680 cells with “wet” cathodes in so-called structural packs in Texas-built Model Ys. A bulk of those cars use the older 2170 cells.
Tesla intends to use a cathode with over 90% nickel in the next generation of 4680 cells, two sources said. L&F is expected to be one of the suppliers of that high-nickel cathode, a different source said.
