Tesla's breakthrough battery suffers slow ramp up

Two years ago, Tesla CEO Elon Musk took the stage during the automaker's "battery day" presentation to unveil a breakthrough battery cell designed to significantly increase range, reduce production costs and enable power-hungry future products like the Cybertruck pickup and Semi cargo hauler.

But despite Musk's 2020 prediction that Tesla would be producing enough of the new batteries for 1 million or more vehicles this year, the production ramp is still in its early stages.

Tesla is now forecasting significant output by the end of the year in anticipation of a mid-2023 Cybertruck launch.

"We are making a decent number every week and I think we'll be in high-volume production by the end of the year," Musk said at the company shareholders' meeting last week.

The 4680 cylindrical battery, with a 46-millimeter diameter and 80-millimeter height, debuted in a small number of Model Y crossovers built at a new plant in Austin, Texas, during the second quarter, Tesla said. The 4680 is five times the size of Tesla's existing 2170 battery cells made at a joint venture with Panasonic in Nevada.

For comparison, a standard D-size household battery measures 33 millimeters by 62 millimeters.

Tesla said the 4680 cell design will deliver an immediate 16 percent improvement in vehicle range compared with 2170 battery packs. And future improvements in battery materials and vehicle design will result in a net 56 percent gain in range and a 54 percent drop in production costs.

But 4680 output so far has been so constrained that Tesla is mostly continuing to use 2170 cells at its new Texas plant. Tesla had been expected to use the larger new cells with a new "structural pack" that incorporates cells into body structure to reduce size and weight.

"To be clear, we are currently making the cars with the 2170 cells," Musk said on Tesla's second-quarter earnings call. "But it is worth emphasizing that we have enough 2170 cells to satisfy all vehicle production for the remainder of the year. So we're not dependent on 4680. 4680 will be important next year."

With the Cybertruck launch already delayed from 2021, Tesla's timeline for ramping 4680 production to supply both the Texas-built Model Y and the upcoming pickup is on a tight timeline.

"While Cybertruck production does not require the 4680 cells, they are an important component of the truck's ultimate success," said Sam Fiorani, vice president of global forecasting at AutoForcast Solutions.

"Tesla promised extreme performance of the Cybertruck at its introduction, and the 4680 cells are necessary to reach those promises. A lack of the new cells would slow the acceptance of the truck just as other trucks are making it to the market," Fiorani said.

Troy Teslike, a Tesla forecaster on the Patreon subscription platform, estimates that the automaker won't reach 4680 volume production of 5,000 battery packs a week until May 2023.

Teslike estimated that the automaker will produce 220 packs per week in August at its battery pilot plant in Fremont, Calif., and 183 packs a week at the Texas factory that just began battery production.

In addition to the slow ramp, the current 4680s are lacking some of the material and manufacturing improvements that are part of the 4680 development program, Tesla said.

"We weren't putting all the bells and whistles in from day one," Andrew Baglino, Tesla's senior vice president of powertrain and energy engineering, said on the earnings call. "The first order of business is really to get the basics right, get to high volume and high reliability and then very rapidly iterate within that to enhance the energy density and reduce the cost of the cell."

Baglino said Tesla expects to be making at least 1,000 4680 battery packs a week by the end of the year. At the battery event two years ago, Tesla estimated 2022 battery production at 100 gigawatt hours — enough for more than 1 million battery packs for the long-range version of the Model Y.

"As we attain the manufacturing goals that we've stated at the ramp that we need to hit next year, we are certainly planning to layer in new material technologies and higher-range structural packs," Baglino said. "We're not holding back goodies for some rainy day or something like that."

Tesla said in February that it had made a total of 1 million 4680 cells since the start of production in Fremont, enough for about 1,200 vehicles. Automotive consultant Munro & Associates, which has examined Tesla's battery packs, said the 2170 pack used 4,416 cells and the 4680 pack had 828.

For some analysts, the 4680 looks like just a bigger battery without a lot of technological innovation that's running far behind schedule — and impacting Tesla's launch of the Cybertruck, Semi and Roadster sports car. The Semi and Roadster were unveiled in prototype form nearly five years ago.

"It's a big show for now — they have a really long way to go," said Taylor Ogan, CEO of Snow Bull Capital and a longtime Tesla vehicle owner. "I thought that they had maybe achieved some sort of improvement over 2170s in low-volume production, but they haven't."

Ogan said his firm is not betting against Tesla stock but does prefer other EV companies such as China's BYD. He often spars on social media platform Twitter with Tesla fans on two subjects: Tesla's claim to be leading the industry in developing autonomous driving capability, and 4680 battery progress, or lack thereof.

"It will be a really powerful battery," Ogan said. "But it will never be the cheapest battery, that's for sure. It will never be the safest battery. It will never be leading in anything other than just energy density."

And there may be more twists and turns as Tesla scales the 4680 in Fremont, Austin and eventually at its new factory in Berlin, which also opened this year using 2170s in the Model Y.

"In battery manufacturing, things don't scale at nearly the same rate as they do with even really complex vehicles," Ogan said. "It looks as much of a mess as I would anticipate."

A small number of Tesla owners who have taken delivery of Model Ys with 4680s — and compared them to the same vehicle made at Fremont with 2170 cells — say the vehicles appear to be similar, for now.

In a side-by-side comparison, Ryan Levenson, a Bay Area entrepreneur who rents a fleet of Teslas on the Turo platform, said acceleration, charging time and weight were about the same. The Texas vehicle, which was a lower trim than its California sibling, was slightly less expensive with a lower range rating.

"There are all these little changes that might have incremental impacts on the user experience," Levenson said on a July YouTube video under his brand name, the Kilowatts. "This is, again, for the most part, the same vehicle you'd get from Fremont."