Tesla Has Delayed Its Battery Productions

Time is running out for Tesla as it misses another deadline to create its own set of next-generation batteries.


FILE PHOTO: A Tesla logo is pictured on a car in the rain in the Manhattan borough of New York City, New York, U.S., May 5, 2021. REUTERS/Carlo Allegri
FILE PHOTO: A Tesla logo is pictured on a car in the rain in the Manhattan borough of New York City, New York, U.S., May 5, 2021. REUTERS/Carlo Allegri
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LONDON (Bywire News) - Concern may be setting in at Tesla as it missed another set of targets to create its own next-generation set of batteries. The announcement raises more questions about Tesla’s ability to match its ambitious plans for growth over the next few years. 

On Wednesday, Tesla said they would rely on suppliers to meet battery demands in 2022 as the importance of learning new technologies is slowing down their plans to boost the production of their own batteries. 

Tesla is the only major automaker which also produces its own batteries. Rival companies partner with battery producers most of which are based in Asia. Batteries are commonly known as the most expensive component of electric vehicles. If electric vehicles are to become more widespread, they need to bring down their costs. 

If Tesla is successful, it will be in pole position to access a steadier supply of cheaper, higher-range batteries which can help it meet its goal of producing 20 million vehicles a year. However, they need to transition to these batteries next year to avoid having to search for supplies whilst the global industry scales up electrical production.

For example, on Thursday, Ford Motor Co recently announced a deal with Chinese battery maker CATL.

According to Benchmark Mineral Intelligence (BMI) analyst Caspar Rawles, time is running out for Tesla. “That end of the year deadline is fast approaching, meaning the company will need to work quickly to resolve the remaining issues to meet the volume they need.” 

The new batteries are called 4680s referencing their 46mm diameter and 80mm height. As they are much larger, they hold more energy than the current 2,170 batteries while also reducing costs. Tesla is also leading a cost-efficient battery manufacturing process called dry battery electrode.

"Our focus right now is on the dozens of little issues that inhibit the production ramp of the 4680," said Musk in a conference call after releasing quarterly results.

"When something is revolutionary, there's a lot of unknowns that have to be resolved," Musk added when referring to the dry battery electrode process. "So, we're confident of resolving those unknowns but it's very, very difficult," he concluded, adding that it is making fast progress.

Time Running Out 

In 2020, Tesla announced plans to have a 100-gigawatt capacity of 4680s this year which would be enough to supply production at new factories based in Texas and Germany.

Musk said in April that Tesla’s vehicle production ramp-up would be at risk in early 2023 if they failed to solve the issues they face manufacturing 4680 while expressing the importance of these batteries. 

Tesla Senior Vice President Andrew Baglino said that he aims for 4680 outputs to exceed 1,000 per week by the end of 2022. However, he failed to specify whether that figure referred to vehicles or battery cells as one thousand battery cells are only enough for about one car. That would put the figure far short of the Texas factory automotive production targets according to Benchmark’s Rawles.

Tesla’s test line for 4680 battery cells that are based in California has improved output and they aim to begin the production of those cells in their new Texas factory this quarter said Baglino. However, he did not give a forecast for a 4680-battery factory in Berlin.

Tesla’s integration would give the automaker more autonomy over the key battery supply chain however according to Evan Horetsky, a partner at McKinsey who was formerly a Tesla executive it also comes with risk. “You also take on all the risks of cell production," he said. "So do you want to dump that money and take on that risk yourself?"

Abhishek Murali, an analyst at Rystad Energy made it clear that Tesla does have options. "Right now,” he said, “it's not affecting their sales as much because no one is going out and saying, 'I'm only going to buy a vehicle that comes with 4680'.”

Tesla plans to expand its battery suppliers to include China’s BYD Co LTD. Panasonic has also announced plans to build a US battery factory in Kansas which would also supply Tesla. CATL, a Tesla supplier, is also scouting for sites for a factory in North America. 

Tesla, then, is betting big on its batteries. Its reputation is at stake and so too could be the future of its business. 

An analyst at Cowen, Jeffery Osborne said in a report that the company seems to have issues with ‘techie’ features like the new batteries and self-driving technology. If those problems continue, he said, “we see pressure ahead as investors are growing tired of missed deadlines and false hopes.”

(Writing by Samba Jallow, editing by Tom Cropper and Klaudia Fior)

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