There’s been a lot of interest in Tesla’s 4680 batteries since before they were even announced, but their development and ramp-up have been a bit below par in terms of most people’s expectations. I’ve seen various claims about these, and those claims have diverged quite a bit as time has gone on, so it was nice to get a little bit of an update on these batteries from Tesla yesterday on the company’s quarterly shareholder conference call (and briefly in its shareholder letter).
First of all, here’s the statement on them in the shareholder letter: “4680 ramp continued successfully in Q1 and continues to stay ahead of the Cybertruck ramp. Costs continued to come down sequentially as scrap, yield and production rate improved.”
On the call, when asked about that further, Tesla execs clarified that they weren’t producing more 4680 batteries because it didn’t really make sense to do so until Cybertruck production ramped up and more were needed. So, that tells us that battery production ability is not an issue, but also that they aren’t seen as needed more broadly in higher quantity.
Furthermore, when the matter was discussed further, Elon Musk and crew talked about how it seemed every major automaker put in huge orders for batteries a few years ago, driving up battery prices and limiting availability, which led to Tesla pursuing its own battery methods to drive down costs. Now, the battery market has reversed, and there’s not such a need to produce a bunch of in-house batteries.
They also highlighted that they used this 4680 battery development to drive down some supplier costs, and the company is actually able to insert those savings into its supply chain even while getting the end product from external battery makers. In other words, Tesla can buy inputs to battery cells on the cheap, pass those inputs on to battery cell producers (either simply via contract or physically doing this — it’s not clear, but I assume the former), and then benefit from lower battery costs than the competition.
So, that’s where it stands with 4680 Tesla battery production and the greater use of 4680 batteries.
They also briefly discussed the Inflation Reduction Act of 2022 and its impact on battery production, noting that the law does indeed encourage more domestic battery production in the USA, but also noting that they don’t know how long that will last for. (In short, if a Republican administration comes in, especially backed by a Republican Congress, they could kill the IRA and basically give full reign to Chinese battery companies to dominate the sector again — even for US-sold electric cars.) In regard to this, they noted that their own 4680 battery production capability gave them a hedge against very anti-Chinese EV policies.
Overall, it seems to me that the 4680 battery project is going well. That said, it doesn’t seem to have led to big breakthroughs in battery production and costs, which is what was initially presented at Battery Day some years ago. So, I guess you can say it’s debatable how successful it’s been. But, anything that brings down costs and helps to de-risk seems like a clear benefit to me, even if not being as revolutionary as initially hyped.
