Inside Tesla’s attempt to keep Musk’s battery promise

By Norihiko Shirouzu and Paul Lienert

(Reuters) – The secret behind Elon Musk’s goal of selling 20 million Teslas a year by 2030 lies in his breakthrough battery technology.

The good news is that by using larger cells and a new electrode-drying process, Tesla could cut the cost of a Model Y battery in half, saving more than 8 percent of the car’s original U.S. price, battery experts said. ties with the company.

The bad news is that it’s only halfway there, according to 12 experts close to Tesla or familiar with its new technology.

That’s because the dry-coating technique used to produce the larger cells of Tesla’s 4680 battery is so new and unproven that the company is having trouble scaling manufacturing to the point where big cost savings kick in, experts told the Reuters.

“They’re just not ready for mass production,” said one of the experts close to Tesla.

But the gains Tesla has already made in lowering battery production costs over the past two years could help boost profits and widen its lead over most electric vehicle (EV) rivals.

Musk’s promised improvements in battery cost and efficiency are seen by investors as critical to Tesla’s bid to usher in an era where it can sell a $25,000 EV at a profit — and have a better chance of meeting its 2030 goals.

Battery systems are the most expensive single component in most electric vehicles, so creating low-cost, high-performance packages is key to producing affordable electric cars that can match their sticker-price internal combustion engine competitors.

Tesla is one of the few major automakers that makes its own EV batteries, and by making Model Y cells in US factories, the SUV will remain eligible for US tax credits when many competing EVs no longer qualify.

Among the 12 battery experts Reuters spoke to, nine have close ties to Tesla, and three of the nine have looked at Tesla’s new and old battery technology inside and out.

Tesla did not respond to requests for comment.

“IT WILL SOLVE IT”

The sources predict that Tesla will struggle to fully implement the new dry coating manufacturing process before the end of this year, and perhaps not until 2023.

Stan Whittingham, co-inventor of lithium-ion batteries and 2019 Nobel laureate, believes that Tesla CEO Elon Musk was overly optimistic about the time frame for commercializing the new technique.

“I think he’ll work it out, but it won’t be as fast as he wants it to be. It’s going to take some time to really test it,” he said.

In August, Musk told shareholders Tesla would mass produce 4,680 batteries by the end of 2022.

According to experts, Tesla has only managed to reduce the cost of the Model Y battery between $2,000 and $3,000 so far, about half of the savings Tesla had planned for the 4680 battery, which it introduced two years ago.

But those savings came mostly from the design of the new 4680 cells, which are larger than those in Tesla’s current 2170 battery, they said.

But the heart of the cost-cutting effort is dry-coating technology, which Musk has described as revolutionary but difficult to execute.

According to the sources, it should offer up to half of the $5,500 in cost savings Tesla hopes to achieve by cutting production costs and one-time capital expenditures.

Tesla acquired the know-how in 2019 when it paid more than $200 million for Maxwell Technologies, a San Diego company that makes supercapacitors, which store energy for devices that need quick bursts of electricity, such as camera flashes.

Building on Maxwell’s technology, Tesla began manufacturing 4,680 dry cells this year, first in a pilot near its factory in Fremont, California, and more recently at its new global headquarters in Austin, Texas.

‘BEST IN CLASS’

The technology allows Tesla to abandon the older, more complicated and expensive liquid coating process. It is expensive because it requires a significant amount of electricity, machinery, factory space, time and a large workforce.

To coat electrodes in the wet process, battery manufacturers mix the materials with toxic bonding solvents. Once coated, the electrodes are dried in huge ovens, with the toxic solvents evaporated in the process being recovered, treated and recycled – all of which add to costs.

With the new technology, the electrodes are coated using different binders with little liquid use, so they don’t need to dry. This means it is cheaper, faster and also less harmful to the environment.

Because of its simplicity, the process allows Tesla to cut capital costs by a third and reduce both a factory’s footprint and energy consumption to a 10th of what it would take for the liquid process, Tesla said.

However, the company has had trouble commercializing the process, the sources said.

Maxwell developed the dry coating process for supercapacitors, but the challenge with coating electrodes for EV batteries is that they are much larger and thicker, making it difficult to coat with consistent quality at mass production speeds.

“They can produce in small volume, but when they started high-volume production, Tesla ended up with a lot of rejects, too many,” one of the sources connected to Tesla told Reuters.

Production yields were so low that all projected cost savings from the new process were lost, the source said.

If all potential efficiencies from dry coating and larger cells are realized, manufacturing costs for the Model Y’s 4680 battery pack will drop to $5,000 to $5,500 — about half the cost of the 2170 pack, the sources said.

The rising cost of battery materials and energy poses a risk to those predictions, however, and Tesla has yet to significantly improve the new battery’s energy density or the amount of power it packs, as Musk has promised.

But despite those factors, the savings Tesla is expected to achieve will end up making the 4680 battery the industry’s “best in class” for the foreseeable future, a source said.

ENLARGEMENT

Much of the $2,000 to $3,000 in cost savings achieved with the 4680 battery so far has come from other improvements, and using larger cells has proven particularly powerful, experts said.

4680 cells is 5.5 times the size of 2170 cells by volume. The earliest cylindrical cells are 21 mm in diameter and 70 mm in height, hence the name. The 4680 cells are 46 mm in diameter and 80 mm in height.

With the older technology, Tesla needs about 4,400 cells to power the Model Y, and there are 17,600 points that need to be soldered — four per cell — to create a package that can be built into the car, the sources said.

The 4680 battery only needs 830 cells, and Tesla changed the design so that there are only two solder points per cell, reducing soldering to 1,660 points and leading to significant cost savings.

The simpler design also means there are fewer connectors and other components, which has allowed Tesla to further save on labor costs and machine time.

Another source of efficiency was the much sturdier outer case of the larger element. Tesla can now glue the cells together into a rigid honeycomb-like package, which is then attached directly to the Model Y’s internal body structure.

This eliminates the intermediate step of grouping cells into larger units, which are then installed in a traditional battery, the sources said.

By switching to this cell-to-vehicle design, Tesla can reduce the weight of a traditional 1,200-pound battery by 55 kilograms or more — saving about $500 to $600 per pack, one of the sources said.

But knowing the dry coating technique remains the holy grail.

“Increasing battery volume has helped a lot in increasing efficiency, but the pressure to achieve 50% cost savings for the cell as a whole is another matter,” said one source.

“That will depend on whether Tesla can successfully implement the dry coating process in a factory.”

(Reporting by Norihiko Shirouzu in Beijing and Paul Lienert in Detroit; Editing by David Clarke)

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