Tesla CEO Elon Musk hopes to sell 20 million electric cars a year by 2030, and the secret lies in groundbreaking new battery technology, a new process that will help cut battery costs in half. However, many experts question whether Elon Musk’s predicted timeline is too optimistic.
Several battery experts close to Tesla agree with Elon Musk, saying that by using larger batteries and a new dry electrode coating process, Tesla could cut battery costs in half, thus allowing electric cars to have an 8 percent lower starting price in the United States. But the bad news is that Tesla’s technology development process has a long way to go.
Experts explained that this is because the dry coating process used to produce this larger battery in Tesla’s 4680 battery is a completely new technology that has not been proven to the point that the company has encountered difficulties in scaling up production and significantly cutting costs. One expert said, “Tesla is not ready for mass production.”
Nonetheless, Tesla has made significant progress in cutting battery production costs over the past two years, which could help boost profits and expand its lead over most electric car competitors.
Elon Musk’s commitment to cutting battery costs and improving battery performance is seen by investors as key to Tesla’s quest to usher in a whole new era. In this new era, Tesla could be profitable even if it sells electric cars at $25,000, and could even achieve that goal as early as 2030.
The battery system is the most expensive component in most electric vehicles, so making low-cost, high-performance battery components is key to producing mass-market electric vehicles that can compete head-to-head with internal combustion engine vehicles on price.
Tesla is one of the few major automakers that can produce its own car batteries, and by producing its Model Y batteries in U.S. factories, its cars are eligible for U.S. tax credits. By contrast, many of its competitors’ electric cars may no longer be eligible.
Elon Musk overly optimistic?
Industry insiders predict that Tesla may have a hard time fully adopting the new dry coating process by the end of this year, but will have to wait until 2023.
Stan Whittingham, co-inventor of the lithium-ion battery and 2019 Nobel laureate, believes Elon Musk is too optimistic about the timeline for commercializing this new technology. He said, “I think he’ll eventually work it out, but not as quickly as he says he will. And we still need a lot of time to test the new technology.”
In August, Elon Musk told Tesla shareholders that by the end of 2022, the company would be producing large quantities of 4680 batteries. But so far, Tesla has only been able to reduce the cost of the 4680 battery by $2,000 to $3,000, about half of the planned savings, according to experts. Tesla hopes to achieve $5,500 in cost savings by significantly cutting manufacturing costs and one-time capital expenditures, people familiar with the matter said.
But those savings, they said, will come mainly from the new design of the 4680 cells, which are larger than the 2170 cells Tesla currently uses. At the heart of the cost squeeze, however, is dry coating technology, which Elon Musk calls revolutionary but difficult to put into practical use in the short term.
Tesla acquired the dry-coating electrode process in 2019 by spending more than $200 million to acquire Maxwell Technologies, a San Diego-based company that makes supercapacitors, which store energy for devices that need fast power, such as camera flashes.
Building on Maxwell’s technology, Tesla began producing 4680 cells this year, first at a pilot plant near its Fremont, California, facility and more recently at its new global headquarters in Austin, Texas.
Best in class
The dry coating process allows Tesla to ditch the older, more complex and more costly wet coating process. The latter is expensive because it requires a lot of electricity, machinery, factory space, time and labor.
To coat the electrodes using the wet process, battery manufacturers need to mix these materials with a toxic binder solvent. Once coated, the electrodes are put into large ovens to dry, and the toxic solvents that evaporate in the process need to be disposed of and recycled, all procedures that add to the cost.
With the dry coating process, the electrodes can be coated with different binders with little to no liquid, so they do not need to be dried. This means that the production process is cheaper, faster and less damaging to the environment.
Because the new production process is simpler, Tesla said, the process allows it to cut capital expenditures by a third and slash factory floor space and energy consumption to one-tenth of what is needed for the wet process.
Maxwell has developed a dry coating process for supercapacitors, but the challenge with coated electrodes for electric vehicle batteries is that they are larger and thicker, making it difficult to guarantee their quality in mass production, the sources said.
Tesla has been able to produce new batteries in small batches, but when they started scaling up production, the company ended up with a lot of scrap,” said the source. At the same time, battery yields were so low that all the expected potential cost savings from the new process were wiped out.”
The source also revealed that if all the potential efficiencies of the dry coating process and larger cells are realized, the 4680 cell pack manufacturing cost should drop by $5,000 to $5,500, about half the cost of the 2170 cell pack.
However, rising battery material and energy costs pose a risk to these projections, and Tesla has not yet been able to significantly increase the energy density or power capacity of the new cells, as Musk has promised. Despite these headwinds, Tesla expects the 4680 battery to be the best electric vehicle battery in the industry for the foreseeable future.
Increasing the size of the battery
So far, experts say, the 4680 battery has saved $2,000 to $3,000 in costs, and much of that comes from other improvements as well. The 4680 battery is 5.5 times the size of the 2170 battery, which has proven particularly effective with larger cells. The older cylindrical battery has a diameter of 21 mm and a height of 70 mm, and gets its name from that. The 4680 battery has a diameter of 46 millimeters and a height of 80 millimeters.
People familiar with the matter said that using the older technology, Tesla needs about 4,400 cells to power the Model Y. It takes 17,600 points of welding (four per cell) to set these cells into a usable battery pack for the car. The 4680 battery pack, on the other hand, requires only 830 cells, and Tesla has changed the design so that there are only two weld points per cell, reducing the number of weld points to 1,660, a significant cost savings.
The simpler design also means fewer connectors and other components, which allows Tesla to save further on labor costs and machine time.
Another efficiency gain is that the larger battery features a more robust housing. Tesla can now glue the batteries together with adhesives to form a stiffer honeycomb assembly that can then be attached directly to the Model Y’s internal body structure. This eliminates the intermediate step of strapping the batteries into larger modules and then mounting them in the car, people familiar with the matter said.
By moving to this simple design, Tesla can reduce the traditional 1,200-pound (544 kg) battery pack by more than 25 kilograms, saving about $500 to $600 per pack, the people said.
Still, mastering the dry coating technology won’t be easy. People familiar with the matter said, “Increasing the size of the battery is a big help to improve production efficiency, but driving an overall 50 percent savings in battery costs is another matter, which will depend on whether Tesla can successfully deploy the dry coating process in its factories.”
