‘Unknowns’ delay Tesla’s ramp-up of its own cutting-edge batteries

‘Unknowns’ delay Tesla’s foray into its own cutting-edge batteries

Tesla said on Wednesday it will rely on suppliers to meet demand for batteries this year as the need to learn new technologies hampers its plan to increase production of its own batteries.

Tesla Inc is falling short of CEO Elon Musk’s goal of making its own next-generation batteries, raising questions about the top electric car maker’s ability to sustain a massive expansion of car production next year and beyond.

Tesla said on Wednesday it will rely on suppliers to meet demand for batteries this year as the need to learn new technologies hampers its plan to boost its own battery production.

Tesla is at the forefront of its field—it’s the only major automaker that manufactures its own batteries without partnering with suppliers, although like other companies it buys batteries from companies based mostly in Asia. Batteries are the most expensive part of an electric vehicle, and lowering their price is essential to expanding the popularity of electric cars.

If Tesla succeeds, it will secure a steady supply of cheap, longer-range batteries, the basis for its own goals of producing 20 million vehicles a year. But it needs such new batteries next year to avoid scrambling for supplies, just as the global industry expands electricity production.

Ford Motor Co, for example, announced a major new deal with Chinese battery maker CATL on Thursday.

For Tesla, “time is ticking and the year-end deadline is fast approaching, which means the company will have to work quickly to resolve the remaining issues to meet the volume they need,” said Caspar Rawles, an analyst at Benchmark Mineral Intelligence (BMI). Reuters.

The new batteries are called 4680s and indicate a diameter (46 mm) and height (80 mm). They are much larger and can hold more power than current 2170 batteries, reducing costs. Tesla also pioneered a cost-effective new battery manufacturing process called the dry cell electrode.

“We are now focusing on dozens of small issues that are holding back the production ramp of the 4680,” Musk said on a conference call Wednesday after the company released quarterly results.

“When something is revolutionary, there are a lot of unknowns that need to be solved,” he said, referring to the dry electrode process. “So we’re sure we’re going to solve the unknowns, but it’s, it’s very, very difficult,” he said, adding that he’s moving quickly.

Time is running

In 2020, Tesla indicated that it would have 100 gigawatts of 4680 capacity this year – enough to supply production at new factories in Texas and Germany.

Musk said in April that Tesla’s production ramp-up will be in jeopardy early next year if the automaker doesn’t fix its 4,680 production problems. He said on Wednesday that 4680 will be important for 2023.

Tesla Senior Vice President Andrew Baglino said Wednesday that his goal is for the 4680 to exceed 1,000 per week by the end of this year. He did not specify whether the number refers to vehicles or battery cells. (A thousand battery cells are enough for about one car.) Either way, that number is far behind the Texas auto plant’s goals, Benchmark’s Rawles said.

Tesla’s test line for 4,680 battery cells in California has improved performance, and the company intends to start producing those cells at its new factory in Texas this quarter, Baglino said. He did not make a forecast for the 4680 battery factory in Berlin.

Tesla’s vertical integration would give the carmaker more control over the key battery supply chain, but “you also take on all the risks of making the cells,” Evan Horetsky, a partner at McKinsey who was previously a Tesla executive, told Reuters.

“So you want to throw away the money and take the risk yourself?” he said.

Tesla has options. “Right now it’s not affecting their sales that much because nobody’s saying, ‘I’m only going to buy a vehicle that comes with 4680,'” said Abhishek Murali, an analyst at Rystad Energy.

Tesla is expanding its battery suppliers to include China’s BYD Co Ltd, and Panasonic recently announced plans to build a US battery factory in Kansas to supply Tesla. CATL, a Tesla supplier, is also looking for factory sites in North America.

But part of Tesla’s reputation and market value depends on its technological progress.

Jeffrey Osborne, an analyst at Cowen, said in a report that the company appears to be struggling with “technical” features such as new batteries and self-driving technology. If these problems continue, he said, “we see pressure ahead as investors grow weary of missed deadlines and false hope.”

Sanjit
Sanjit

I am Sanjit Gupta. I have completed my BMS then MMS both in marketing. I even did a diploma in computer software and Digital Marketing.

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