In a recent Tweet Elon Musk just announced: "Dry electrode is a key piece (one of many
pieces) of the puzzle for lowering cost of lithium batteries.
That said, it has required an *immense* amount of engineering to take Maxwell’s proof-of-concept
to high-quality, volume production & we’re still not quite done."
It was always going to be the dry slurry technique that was going to cause the most delays with
the 4680 production line, and this was what I had inferred from the Q1 earnings call too.
Firstly I do appreciate Elon keeping us updated, in my opinion perfecting this process is the
key to growth for this company. It is arguably the single most important part of the business
that needs to be sorted. It is what will be responsible for so much less floor space required
in making batteries, thus smaller factories required for equal output. Giving Tesla a
tremendous competitive advantage over every other battery factory.
Yes, tab-less is brilliant too, and allows Tesla to increase the velocity of the production
line, but the dry electrode process simply removes so much of the production line, along
with significantly less capital required. But from this Tweet it does sound like they
are doing absolutely everything they possibly can in order to sort it, as I think it really
is the number one barrier right now for this company getting through the next stage.
Just because we haven't really heard overly too much about the 4680 batteries, doesn't
mean Tesla aren't working around the clock to perfect the production process as much
as possible.
Now, obviously I can not offer you financial advice, this is not something I have to say,
but it's something that is absolutely true, as I have absolutely no idea as to what your
financial situation is. But as far as Tesla investment advice, in my opinion, on however
much weight you wish to place on that, once Tesla sort out the dry electrode process,
then there is no stopping them.
Tesla really appear to be attempting to do everything they say they can. Some of these
timelines are just incredibly hard to predict though, its a new industry with products,
tools, equipment and machines that haven't even been invented yet. They are having to
be invented along the way. Oh but of course if you are a legacy auto
company then somehow you have no problem estimating timelines of making one million EVs by 2025.
Or what would be about 3 times faster than Tesla managed to scale.
In Elon's tweet, he expresses the word "immense" amount of engineering. This coming from the
top engineering company in the world, with resources from the top rocket company in the
world, I would say, therefore "immense" carries a lot of weight in this context.
Elon says, not quite there yet. Implying possibly they nearly are, and that it will eventually
happen. Possibly not that far off, and this is to reach the level of high-quality volume
production. We also don't know what is meant by "not quite
done". Does it mean that possibly there is human intervention required currently for
the dry electrode process, which is simply slowing mass scale production by too much
to get the numbers we really require. In other words, we don't quite know as to what level
the 4680s are currently produced, and at what speed.
This really could be a hurdle to get past before Tesla's stock price sets off again.
But really even if it took 2 more years to do, then sure that may set back Tesla by 2
years in some areas, but the fact it is possible and Tesla can achieve it, whenever it is achieved,
will mean that Tesla has a solid path to $3-5 trillion valuation. I am just trying to put
into perspective what kind of break though this achievement means for the company. Assuming
no one else managed to achieve something similar before Tesla.
On the other side, you have to think, if its this hard for Tesla, and all their engineers
and unlimited capital, most experience, and the most to benefit from it, then how else
is anyone else going to come close? It's highly possible right now CATL, or SK
Innovation, may perhaps be doing their own R & D on how to remove the wet slurry electrode
process. It doesn't take a genius to realize truly just what an advantage it is in manufacturing.
But can they achieve it is a different question. Even if they were able to, then they would
still likely have years until they were able to scale. These critical years give Tesla
that much more time to gain a lead in EVs and batteries. And that's if these other battery
manufacturers can do it.
LG and Panasonic will likely be making 4680s batteries for Tesla. Therefore wouldn't that
mean they have all the engineering know how on how to create their own production line
of similar batteries? Well Tesla had to purchase Maxwell Technologies for this technique. Which
was not cheap.
It would appear Tesla were not actually interested in Maxwells's hyper capacitors, as Tesla are
now selling Maxwell.
So we are back to the dilemma of being a Tesla shareholder, do we prefer that Tesla keep
all the technology for themselves, or would we rather the technology was shared and it
further accelerated the transition to clean energy? I guess the question is will Tesla
open the patent for the dry electrode process. It sounds like the entire process would be
difficult to replicate anyway, perhaps even with the patent. And this is just one element
of the magic in the 4680 battery. To replicate it all would be exceedingly difficult.
It's funny when I first invested in Tesla they didn't really have their own battery.
It was Panasonic, in other words, Tesla have now created their biggest competitive advantage.
Well at least once this process is completed. It means that the battery costs for Tesla
are significantly less than anyone else's. Seeming as Tesla's demand is so strong, its
unlikely that this saving will be passed on to the consumer. Instead its more likely as
to just accumulate into larger profit margins for Tesla. Giving them more capital to re-invest
into the business and products. Again further improving the products and taking advantage
of more economies of scale.
You see whilst the likes of the Chinese are busy trying to just save cost, by reducing
margins, they make less profit, leaving less money for capital to invest in the business.
Capital that Tesla are able to use not just to cut costs, but also to add value on the
actual product. i.e. Tesla end up making a more valuable product, for less money. Making
it much harder for some Chinese EVs to compete.
The dry slurry technique is a huge part of why the 4680 is such a big deal. For those
of you who were around at the time Tesla purchased Maxwell Technologies, it was exciting to first
find out that Tesla were even more likely to be making their own batteries, and the
fact they will be using the dry electrode process was even more exciting. But here we
are, even still today, waiting to see if Tesla will achieve this. It's hard to believe, but
battery day hasn't even been a year ago. Yet so much has happened since, we have seen and
and heard so many ideas, but all resting on the success of this last element.
Once achieved we assume that the battery lines can presumably be completed in Texas and Berlin.
In reality the 4680 production line didn't really need to be perfected until these factories
started ramping up. It sounds like Tesla are producing enough 4680 batteries for Berlin
from Kato Road, until the factory starts ramping. By which time we hope its all sorted. Given
that, then Tesla probably have until about the end of the year to get this sorted.
Elon's Tweet doesn't actually indicate whether or no they are even behind schedule or not.
Presumably the real schedule is having the 4680 lines ready by the time these new two
factories ramping up. Or else for the time being, they may only be limited to whatever
4680 batteries Tesla can produce out of the Kato Road facility. Significantly holding
back the ramping of these factories.
But will these factories actually be battery constrained in their ramping up to mass market.
It seems fairly certain that both these factories will have a capacity of around at least one
million units a year. If 60 KWh was the average battery pack size per vehicle, then that requires
120 GWh a year of batteries. Tesla's plan for these factories was 100 GWh, including
also what Kato Road produced. Even witnessing how impressive the latest
Model Y is ramping up in Shanghai, if Tesla met the 100 GWh objective for next year, it
would look like the factories would not be battery constrained in ramping. I mean we
are talking about 1.6 million EVs potentially from those batteries. Assuming all were assigned
to autos, and not energy. If that was the case, then Tesla's growth for next year would
be well in excess of 100%.
Ok, well I guess this is just another video where I once again explain what a big deal
it is to see the 4680 production line complete.
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