Tesla is falling short of CEO Elon Musk's target to make its own next-generation batteries, sparking questions over the top electric car maker's ability to maintain its blistering expansion of auto production next year and beyond.
Tesla said on Wednesday it would rely on suppliers to meet
battery demand this year, as the necessity of learning new technologies is
holding back its plan to boost production of its own batteries.
Tesla is an outlier in its industry — it is the only major
automaker that makes batteries itself without partnering with suppliers,
although like other companies, it buys batteries from companies, mostly based
in Asia. Batteries are the most expensive component in electric vehicles and
bringing down their cost is crucial to expanding EV popularity.
If Tesla succeeds, it will assure itself a steadier supply
of inexpensive, higher-range batteries, a foundation 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 scales up electric
production.
Ford Motor, for instance, announced a major new deal with
Chinese battery maker CATL on Thursday.
For Tesla, "time is running out and 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,"
Benchmark Mineral Intelligence (BMI) analyst Caspar Rawles told Reuters.
The new batteries are called 4680s, denoting the diameter (46mm)
and height (80mm). They are much larger and hold more energy than the current
2170 batteries, reducing costs. Tesla is also pioneering a cost-efficient new
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," Musk said on a conference
call on Wednesday after the company released quarterly results.
"When something is revolutionary, there's a lot of
unknowns that have to be resolved," he said, referring to the dry battery
electrode process. "So we're confident of resolving those unknowns but
it's, it's very, very difficult," he said, adding that it is making rapid
progress.
Time running out
In 2020, Tesla signaled it would have 100-gigawatt capacity
of 4680s this year - which would be enough to supply production at new
factories in Texas and Germany.
Musk said in April that Tesla's vehicle production ramp-up
would be at risk early next year if the automaker failed to solve its 4680
manufacturing issues. On Wednesday he said that 4680s would be important for
2023.
Tesla Senior Vice President Andrew Baglino said on Wednesday
that he aims for 4680 output to exceed 1,000 per week by the end of this year.
He did not specify whether that figure referred to vehicles or battery cells.
(One thousand battery cells are enough for about one car.) In either case, that
figure is far short of the Texas factory's automotive production targets, said
Benchmark's Rawles.
Tesla's test line for 4680 battery cells in California has
improved output and the company aims to begin producing those cells in its new
Texas factory this quarter, Baglino said. He did not give a forecast for a 4680
battery factory in Berlin.
Tesla's vertical integration would give the automaker more
control of the key battery supply chain, but "you also take on all the
risks of cell production," Evan Horetsky, a partner at McKinsey who was
formerly a Tesla executive, told Reuters.
"So do you want to dump that money and take on that
risk yourself?" he said.
Tesla does have options. "Right now, 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'," said Abhishek Murali, an analyst at
Rystad Energy.
Tesla is expanding its battery suppliers to include China's
BYD, and Panasonic recently announced a plan to build a US battery factory in
Kansas that would supply Tesla. CATL, a Tesla supplier, is also scouting for
sites for a factory in North America.
But part of Tesla's reputation and market value depends on
its technological advances.
Jeffrey Osborne, an analyst at Cowen, said in a report that
the company seemed to be struggling with "techie" features such as
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." © Reuters
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