Tesla’s Big Problem

Things aren’t going to plan for Musk

Tesla is currently on top of the world with record-breaking stock valuations, sky-high profits and new factories popping up all over the place! But all is not as it seems because Tesla is actually in a spot of trouble. Their revolutionary new battery (tabless 4860), which Musk has gambled the future of Tesla on, is yet to materialise and is stalling their monstrous growth. So, can Musk solve Tesla’s big problem?

Firstly, what is Tesla’s new battery? Well, in 2020 during ‘Battery Day’, Musk announced a new battery cell form factor called the 4860 (48mm wide and 60mm tall). These far larger batteries were going to be built by Tesla and utilize a ‘tabless’ design. This shape and unusual construction would make charge times quicker, manufacturing far cheaper and the battery pack way more energy-dense. Even better, we would only have to wait until late 2021 for these incredible batteries to start production!

For more detail on the 4860 read my article “Tesla’s Next Revolutionary Battery”.

Well, it’s now the middle of 2022, and yeah, no fantastic 4860 batteries are here, which is a significant problem for Tesla.

You see the Cybertruck, Semi, Roadster and a potential $25k budget car are all designed around these batteries. Furthermore, the performance of these incredible EVs depends on the 4860, so even if you modified the body to take their old battery packs, customers would not be happy.

This is particularly bad for the Cybertruck. The valuation of current Cybertruck reservations is an astonishing $80 billion, and production is being delayed, likely due to the lack of 4860s. So Tesla is missing out on a massive payday from this one vehicle alone.

So what is Tesla doing to solve this? Well, Tesla themselves is no longer making it. Instead, Panasonic is developing and setting up the manufacture of the battery. However, Panasonic has only just figured out how to build the 4860 form factor and has yet to incorporate the tabless design. So, Tesla could make a Cybertruck soon, but it will be more expensive, charge slower, potentially weigh more than expected and might not have the blistering acceleration Musk claimed. Somehow I don’t think customers will be too happy about being short-changed like that.

But it is the same story for the Roadster and the Semi. Both of them require the 4860 to work as Musk promised. But these vehicles are Tesla’s future. Sure they have the Model S, 3, X and Y and they are selling really well. But companies like Rivian, Ford, BMW, Porsche, Mercedes, Rimac and even Maserati are all catching up fast and, in some ways, have already overtaken Tesla.

All of these companies have matched Tesla’s performance, range and even automation in some way or another, but Tesla still has the price advantage. However, as these companies get used to EV manufacture and optimize production, they can drop their prices. So in a few years it is possible that a BMW i4 could cost the same or less than a Model 3.

But it isn’t just optimization. Almost every manufacturer is now fully committed to developing their EV tech at light speed. Take Porsche’s recent investment in Group14 and their carbon-silicon anodes with a 50% increase in energy density (more than the 4860). This could make Porsches lighter, faster and more efficient than any other EV! What’s more, they could be using these incredible batteries as soon as 2025.

So, whilst Tesla’s development is on pause until the 4860 comes to fruition, these companies could easily catch up and overtake Tesla. So how long until the 4860 with tabless design goes into production?

Panasonic says they will put the full 4860 tabless cells into production by late 2024. This sounds promising, but we don’t yet know what scale they can deliver. We can guess that Tesla knows it will be a long time before the 4860 is in full-scale mass production because they have stopped Cybertruck reservations in Europe.

Why would Tesla stop reservations, after all, the Model 3 proved that people were happy to wait years to get their car? Well, maybe it is because it could be years until they can start producing the first 4860 cells and even longer for them to begin manufacturing them at scale. So Roadster and early Cybertruck reservations may be delivered in the next few years, but most people won’t get their car for far longer, something like five years plus.

So if Tesla can see that the tabless 4860 is going to be another bottleneck in production, just like they did with the launch of the Model 3 but on a way bigger scale, they will have to restrict orders to stop a major backlog and a massive PR nightmare. They will want to avoid repeting what happened with the Model 3 and the shambles of its early production.

So can Tesla speed the production up? Well, Musk’s bid to takeover Twitter shows that he can raise an ungodly amount of money from nowhere in an instant. With a potential $100 billion-plus in total reservations for the Cybertruck, Semi and Roadster, I’m sure he can raise the money to get the 4860 built correctly at scale by Tesla.

But I can see why Musk isn’t doing this. They are still the dominant EV manufacturer and are finally starting to make a healthy amount of profit. In other words Tesla is so far ahead in the game that they can afford to wait for the 4860.

But this doesn’t mean Tesla is out of the woods. Musk needs to balance keeping the company profitable whilst not taking on massive debt to get the 4860 going (just like he did with the Model 3 and nearly bankrupting Tesla). All the while keeping ahead of the competition. If he gets this right Tesla will be a cash cow with technology years ahead of everyone for at least the next decade. But, if he gets it wrong, Tesla could be overtaken technologically and get crushed by needing to take on debt as they lose sales to superior manufacturers. Only time will tell, but if anyone can pull this off, it’s Musk.