Tesla is reportedly considering abandoning the production of 4680 batteries

According to foreign media reports, there are rumors that if Tesla cannot produce larger batteries economically and efficiently, the company will abandon the production of 4680 batteries and rely on third-party suppliers for supply. Reports from South Korea show that South Korean local battery manufacturers are ready to mass-produce cylindrical batteries with a diameter of 46 mm, which seems to confirm this rumor.

In 2021, Tesla introduced a new battery format - dry electrode battery (DBE) - which can greatly reduce production costs and improve battery performance. Not only that, the new silicone anode is also expected to greatly improve battery performance. However, it turns out that the production process of 4680 batteries is relatively complex and difficult to manufacture. In comparison, the 2170 batteries previously used by Tesla are more mature in production.

The 4680 batteries currently produced by Tesla still use a similar chemical method as the previous 2170 NMC batteries. The technology of silicone anodes has not yet been put into practical use in Tesla's 4680 batteries. DBE technology may still face some technical challenges and process problems in the production process of 4680 batteries. At the same time, since the 4680 battery is larger than the 2170 battery, it poses a greater challenge to the cooling of the battery pack, which may also explain why the charging performance of models such as Cybertruck is poor.

Tesla's 4680 battery is not only inferior to the previous 2170 battery in energy density and charging performance, but also costs more. Due to the performance and cost issues of the 4680 battery, Tesla's financial report at the end of the first quarter of 2024 was disappointing. There are rumors that Tesla is considering stopping production of 4680 batteries at the Texas Super Factory and turning to external suppliers. A report from China pointed out that if Tesla's restructuring before the end of the year does not save the expected costs, Tesla may stop producing 4680 batteries.

In order to solve the internal production problems of 4680 batteries, Tesla appointed Bonne Eggleston as the new head of the 4680 battery project. Tesla hopes to reduce supplier costs by the end of this year, although Elon Musk admitted that it is currently more cost-effective to buy batteries from external suppliers than to produce them internally. According to a new report, Korean battery manufacturers are preparing to start mass production of 4680 batteries as early as August this year. If so, Tesla's plan to produce 4680 batteries internally seems to be in vain.

LG Energy Solution is the first battery manufacturer other than Tesla to produce 4680 cells. However, its initial production of 4680 cells at its Ochang plant in South Korea is relatively small, at 9 GWh per year, but it is enough to produce more than 100,000 electric vehicles . LG Energy Solution is building a new plant in Arizona with a capacity of 36 GWh and plans to start production in 2026. Tesla's low profit on 4680 cell production (estimated by industry insiders at 20%) provides LG Energy Solution with an opportunity to become the preferred battery supplier for Tesla electric vehicles.

Image source: LG New Energy

Despite LG Energy Solution's progress in 4680 battery production, the battery market remains highly competitive. Other battery manufacturers are also constantly working to improve production efficiency and reduce costs in order to gain more market share. LG Energy Solution mainly targets Tesla as a customer for its 4680 batteries, but Samsung SDI is considering a wider range. Samsung plans to produce 46mm cylindrical batteries of different sizes by the end of this year. The company is reportedly in talks with BMW and Rivian about plans to provide 4695 batteries, and BMW is also looking forward to the company's ability to provide larger 46120 batteries. SK On, another major battery manufacturer known mainly for pouch batteries, is also interested in producing cylindrical batteries.