Tesla foresees its ground-breaking 4680 battery cells to sell at a lower price than suppliers by the end of 2024, the company’s Vehicle Engineering Vice President disclosed in the investor update.
Tesla aims to beat suppliers’ battery cell prices amid production ramp-up
Reports from last year suggest that Tesla was struggling to manufacture the 4680 battery cells, impeding the production of Cybertruck.
In contrast, Tesla’s recent update on the program revealed that the production of 4680 battery cells substantially increased in the first quarter of 2024. The company expects this production advancement to continue in the coming quarters.
“4680 production increased about 18%, 20% over from Q4 – reaching greater than needed for Cybertruck, which is about 7-gigawatt hours per year as we posted on X.
We expect to stay ahead of the Cybertruck ramp with the cell production throughout Q2 as we ramp the third and fourth lines in Phase 1 while maintaining multiple weeks of cell inventory to make sure we’re ahead of the ramp. Because we’re ramping, COGS continues to drop rapidly week over week, driven by yield improvements throughout the lines and production volume increases.”
Lars Moravy, Tesla Vehicle Engineering VP
That said, the Tesla executive noted that the company expects the 4680 battery cells to undercut the pricing of suppliers’ nickel-based cells by the end of 2024.
“So, our goal, and we expect to do this, is to beat supplier cost of nickel-based cells by the end of the year.”
Lars Moravy, Tesla Vehicle Engineering VP
About the 4680 battery cell
The 4680 battery cell is a new format Tesla developed through innovative technologies. In hindsight, Tesla initially introduced the new cell format in 2020.
The Musk-led company claims that the 4680 battery cells can enable a longer range, faster charging tech, and lower cost. Its development is crucial for Tesla to ensure supply amid the growing demand for battery cells. However, it has been a huge challenge for the company as it was its first time to produce its own cells.
Nonetheless, Tesla plans to continue sourcing a large portion of its cell demand from its suppliers, Panasonic, CATL, and LG.
Significance
It would undoubtedly be remarkable if Tesla could make its 4680 battery cell cheaper than its suppliers.
The success of this project can alleviate CEO Elon Musk’s concerns about increasing battery cell orders by automakers, which can put heavy pressure on the prices of its suppliers.
Despite the 4680 battery cells’ headways, Tesla has failed to shift from its downward trend so far. Its profits fell by 55% in the first quarter of the year. Its sales reached a total of $21.3 billion in Q1 2024, down 9 YoY. Its operating earnings also dropped 54% YoY to $1.2 billion in the same period.
