On battery day, Tesla showed us three different cathode types. The nickel-based, nickel and manganese, and the LFP. Now given battery day was all about the 4680s, it somewhat implied that the LFP cathodes would be used in the cylindrical form for LFP batteries.
This was further re-iterated by Elon, saying that eventually, he wanted all vehicles to use the same form factor. On the Joe Rogan Podcast, he even said that he would close down Fremont to move over to 4680s within time too, but it’s not feasible for another couple of years.
Therefore we have expected that it’s likely that the nickel cathodes come out first. Then we would expect that the LFP 4680s to roll out when Berlin or Texas start producing standard range version Model Ys and then the LFP batteries will become available at that stage. Using Tesla’s usual selling strategy of only selling the higher end versions first, i.e. Long Range and Performance, until demand starts to dwindle and is boosted back with the standard range.
But now we have just heard Elon say this on the Q2 earnings: “But I see us sort of like consolidating around a 4680 nickel-based structural pack for long-range vehicles. And then not necessarily a 4680 format, but some other format for iron-based cells.” Wow! What a bombshell.
How else can that not be inferred as Tesla will not use 4680s for their LFP batteries? They are going to launch another battery. He also said that he expects 2/3rds of the batteries they require will be for LFP. But this is unlikely true. It is possibly still downplaying the importance of LFP, as he also included the energy side of the business, and half of their battery supply would eventually be used for the energy business, which would leave just 1/6th of the remaining LFP batteries for vehicles.
But due to the substantial cost saving of LFP batteries, it’s obviously going to be in a $25,000 Tesla. And a $25,000 Tesla is alone going to be responsible for at least half of all sales. Therefore, half of all batteries go to energy, and then half of all vehicles go to Model 2. Then half of all the other remaining vehicles would be standard range with LFP. Implying 7/8ths of batteries used for LFP, significantly higher than just 2/3rds. Either way, LFP is going to be a huge deal. Although it’s disappointing that Tesla will not have their own LFP batteries for some time, this is Tesla’s most vital product to the future of sustainable energy, without a doubt. And it’s unlikely that Tesla will have enough demand for the whole of 2022 to support only Performance and Long Range versions from Berlin and Texas, especially when they aren’t all using structural 4680 batteries. And then 2023 too, when they are ramped up, surely they can’t expect to sell 100,000 Long Range and performance model Ys a month from each factory. We wouldn’t have thought so.
Yet, if Tesla are going to release a new LFP battery, that’s going to take time. We don’t know how many of you recall, but actually, prior to battery day, a lot of us were speculating that there will be 2 or 3 types of batteries offered. We didn’t expect them all to be the same form. Namely one battery for cars and one for energy storage. The theory being that energy storage doesn’t need to be energy-dense, so it can instead have a battery more suitable to price, made from more abundant ingredients.
So how will Tesla be able to supply enough batteries to meet the demand of the model y in texas and berlin for the standard range versions? It’s very likely that CATL will be able to supply batteries to Tesla. But what happens when Tesla need enough LFP batteries for 200,000 vehicles a month, likely in 2023 if Tesla haven’t ramped up their LFP battery production by then. Well, no worries, CATL also realize what a big deal LFP batteries are. CATL are going crazy on ramping up their battery production, with targets of 380 GWh in 2022.
Now, remember the Model Ys from the new factories will still have front and rear die-cast molds. And although the Long Range, Performance models will likely initially have non-structural 2170 batteries, the LFP batteries will be structural. So we might assume that the battery size may not be too far off 50 kWh, but possibly 55. 50 kWh is used in the current Model 3 standard range. But either way, we are talking about around 10 GWh a month of batteries if 200,000 standard range cars are produced a month, including Fremont and Shanghai too. That would be well within CATL’s capacity, so battery constraints should soon be a thing of the past. Manufacturing is like a chain, and it’s only as strong as the weakest link.
Batteries have been the weakest link in the past, but it looks like chip shortages and other various components may be the new weakest link.
Ok, so Tesla can make do without their own LFP batteries for some time, likely, Tesla can also use some of CATL’s LFP batteries for their energy storage business as well for 2 to 3 years until we see Tesla’s own LFP batteries at mass scale. Although presumably at that stage, they would have learned a significant amount from running their 4680 lines, and have been through all the teething issues and resolved the dry slurry problems. So perhaps it might not be as difficult.
On the other hand, we aren’t even expecting 4680s at a decent rate until late 2022. We think just about all LFP cells used in EVs currently are of the prismatic form, but I don’t think that Tesla will use a prismatic form because manufacturing is faster with the bottling style manufacturing process like they use for the 4680 batteries. It’s going to be about production speed. But also, LFP batteries are far more robust, and they can handle faster charging speeds, and being charged fully and then run down to empty. They are less prone to fires, of course, much cheaper and abundant too. Yes, all these things, which is why we like to express how important they are.
Ok, so it will likely be cylindrical, which is the battery for the vehicle and auto manufacturer, but harder for the battery manufacturer. So it’s another disadvantage for all the auto companies using prismatic and pouch form factors. AKA another hit for the legacy autos. But does it mean maybe they can take a different form factor more suitable to the benefits of LFP due to less concern with degradation? I am actually really happy that Tesla are going with a different form factor for LFP, which was what I presumed was going to be announced on battery day anyway.
As you can see in the graph shown on battery day, the wider the diameter gets, the lower the cost becomes. When using nickel, the cost is highly important due to more expensive elements being used. But with iron, the cost is not as important, so they may make a new form factor designed better for range with LFP, as LFP batteries do struggle more with energy density. The relative extra cost may not be so noticeable for LFP, given the extra range this would allow them to achieve.
However, Elon did say there may even be three different types of form factors they use. This could imply 4680s for Long Range and Performance and LFP battery designed for medium or short range. And then a 3rd one designed for energy storage. The energy storage batteries might have a wider diameter to reduce costs. The wider the diameter, the lower cost of the battery cell. Remember, energy density is not important when it comes to energy storage. It’s all about cost and speed of production. This would make sense. Oh wait, though, it has been calculated that the 4680 batteries are already going to be able to get down to around $55/kWh, which is amazing, given how $100/kWh seemed like such a barrier. But this is 4680 batteries with nickel, and likely manganese. We assumed this was going to be the cost of the LFP 4680 batteries. If that is not the case, then how cheap are the energy storage LFP batteries that Tesla will produce going to be? $25-30/kWh at the cell level? Seriously? We think we might try and look into this further.