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But
the Tesla Inc chief executive is unlikely to hit ambitious
targets for Tesla to mass-produce its own new batteries this
year, industry insiders and analysts say. Though Musk is known
for doing the impossible, starting with turning the electric
vehicle maker into the world's most valuable auto company, the
challenges of launching a new factory and developing a new way
of battery manufacturing, are likely to be too much.
The stakes are high. Prices of battery ingredients like nickel
hit records this week on supply fears stemming from the
Russia-Ukraine conflict, and Musk in January forecast battery
supply constraints next year, making in-house production a key
to growth.
"He is changing the way how battery manufacturing is done," said
Shirley Meng, a University of Chicago professor who previously
worked with Maxwell, a battery technology company acquired by
Tesla. "It's really, really difficult to manufacture at a speed
and at scale."
"I think they will probably fall short of the ramp-up of 4680
over the next year," said Gene Munster, managing partner at
venture capital firm Loup Ventures, referring to the
next-generation EV battery. Munster sees Tesla beating its
targets longer-term, but starting off slowly, given its history
of new-model production.
Musk says making the batteries at scale will be very difficult,
but they are critical to his goal of building less expensive,
longer-range electric cars that will keep Tesla ahead of a
growing pack of competitors.
Like other automakers, Tesla sources battery cells from
suppliers like Panasonic Corp, CATL and LG Energy Solution. In
late 2020, Musk announced that Tesla aims to halve the costs of
the most expensive part of an EV by producing its own batteries.
Tesla's 4680 lithium-ion batteries - with 46-millimeter diameter
and 80-millimeter length - hold about five times the energy of
its current smaller 2170 cells. Tesla can use a smaller number
of new cells for the same energy and driving range, reducing
costs.
Tesla has said it will start delivering Model Y vehicles with
its bigger battery cells by the end of March. In 2020, Musk said
Tesla would have capacity to produce 100 gigawatt hours of 4680
batteries this year, enough to power about 1.3 million cars, and
more than enough to supply production at factories in Texas and
Germany.
Tesla is expected to deliver about 1.4 million vehicles this
year. Industry researcher Benchmark Mineral Intelligence expects
the company to produce batteries for about 30,000 Model Y
vehicles, growing to 484,000 in 2024, according to a previously
unpublished forecast provided to Reuters.
DOUBLE CHALLENGE
Tesla faces a lengthy process in ramping up a battery factory,
complicated by plans to use a new manufacturing technology
called dry electrode coating.
"There's a very long process of fine-tuning the equipment before
you can get to volume production," said Caspar Rawles, chief
data officer at Benchmark, adding that Tesla would have to
refine the manufacturing process this year to ensure volume
production in 2023.
"Battery production is hard, even hard for experienced
suppliers," Rawles said.
Tesla said it produced its one millionth 4680 cell in January.
It did not say how long it took to hit that milestone, but
Benchmark estimated that 1 million cells would power only 1,200
Model Ys, which suggests that Tesla has a long way to go.
Tesla did not respond to emailed questions about its battery
business. Senior Vice President Drew Baglino said in January
Tesla is "making meaningful progress of the ramp curve" in its
test battery factory in Fremont, California, while installing
battery equipment at its upcoming plant in Texas.
Baglino said Tesla's "focus is to drive yield quality and cost
to ensure we are ready for larger volumes this year as we ramp
and next year."
As a sign of Tesla's ambition, it expects to beat established
battery makers Panasonic and LG to market with 4680s.
The crowning difficulty for Tesla is that it is planning a new
manufacturing process, called dry electrode, a technology it
obtained via its 2019 acquisition of California startup Maxwell
Technologies. The factory equipment, Musk said, "doesn't exist.
It's being made."
Dry electrode manufacturing skips a traditional, complicated
step of battery manufacturing that involves a chemical slurry.
If it works, it will be cheaper and more efficient, but Musk
freely admits it will be a challenge.
"The very difficult part is then scaling up that production and
achieving extremely higher reliability and safety with the
cells," he told a European battery conference in November 2020.
Even so, his timeline is seen as optimistic. It took more than a
decade for battery makers to optimize the conventional
manufacturing process for lithium-ion batteries.
Musk - who described a "production hell" of mass producing the
Model 3 sedan several years ago - might experience a "Death
Valley" start to scaling up the dry electrode process, said
professor Meng, adding, though, that Tesla will overcome the
difficulties.
(Reporting by Hyunjoo Jin in San Francisco; Editing by Peter
Henderson, Ben Klayman, Matthew Lewis and Tom Hogue)
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