Tesla switch to LFP indicates a troubling EV trend: We are running out of cells.

Sunday, October 24, 2021 | Chimniii Desk

Key Points

We live in a "cell limited world," not because it's coming, but because it's already here.
Tesla's vice president of vehicle engineering, in particular, stated that the company will not add any new automobiles to its inventory.
Everyone wants to move to electric cars at the same time," according to the former Tesla executive.
The demand for cells and raw materials would be reduced as a result.
Ignore any claims that state-owned electric vehicles are bad for the environment.

Advertisement

Lars Moravy, speaking on Tesla's Q3 2021 earnings conference, said fans shouldn't be concerned about the $25,000 automobile that some still refer to as the Model 2. We live in a "cell limited world," not because it's coming, but because it's already here. That explains a lot of what goes on behind the scenes in the car business, and it also serves as a warning: we're running out of cells.

Tesla's vice president of vehicle engineering, in particular, stated that the company will not add any new automobiles to its inventory. Tesla relies on “increasing cell capacity, both from our suppliers and through our inherent cell” to achieve this. The plan is to boost sales of existing products "while there is still more runway to increase these existing products," with a concentration on the Model Y.

This cell constraint explains Tesla's decision to use LFP cells in all Model 3 and Model Y entry-level versions. What began as a trial in Shanghai has become the standard, not only because these batteries proved to be adequate for Tesla, but also because they are cheaper and more durable. The true benefit they provided was that they allowed the corporation to save ternary cells for more expensive automobiles. The Cybertruck, according to Moravy, will be the first new vehicle to be unveiled.

Tesla will require even more batteries than it does today as a result of the production increase it plans with two new factories (Austin and Grünheide). In other words, it will need to either expand battery production at Giga Nevada or develop its own cells in Austin and Grünheide.

With 4680 cells, that was part of the goal. The issue is that the creation of these batteries has taken longer than Elon Musk anticipated, and the plants will begin production without the cells they were designed to create. Tesla will have no choice but to buy them from anyone who is willing to sell them. If the BYD deal is confirmed, this is what may have pushed it along.

Advertisement

Every week, new factories have been announced by other companies. The most recent to do so was Stellantis. It announced that it would form a joint venture with LGES (LG Energy Solution). It announced a week later that it would have another with Samsung SDI. We expect it to mention "several battery plants" as a result of new contracts. So yet, it has only announced 80 GWh of the 260 GWh it plans to have by 2030. And this is only the start.

Governments are placing limits on the production of combustion engines as if there would be cells available for all automakers to easily transition to electric motors. This will not be the case, as it has become evident. Some firms will be forced to sell something different or stop building cars altogether, particularly those that did not run to maintain a consistent supply of cells.

There's a good chance that without appropriate planning, this political push toward electrification will result in a car shortage. That's essentially what happened with electricity when governments shut down nuclear power plants without replacing them with renewable energy plants to meet Europe's demand.

The cost of energy is rising, and most governments are unsure what to do. Some of them are restarting coal-fired power plants, which is the exact opposite of what their efforts were designed to achieve. When things got ugly with energy generation, decarbonizing the economy became a secondary concern.

In an interview with "This Week in Startups," JB Straubel drew attention to this. "Everyone wants to move to electric cars at the same time," according to the former Tesla executive. Batteries and their components, according to Straubel, will be gone. He had worries about cathodes, separators, and raw materials like nickel, which is the key element in 4680 cells. That was the reason he founded Redwood Materials in the first place: to avoid any shortages.

Advertisement

In that perspective, and given the potential impact of turning all automobiles electric all of a sudden on the supply chain, lobbying for a delayed adoption may not be as anti-environmental as Greta and other children believe. Plug-in hybrids, for example, could be a viable option if properly constructed.

They would conserve cells and enable for the construction of more vehicles if they had enough range for daily trips with smaller battery packs. Pollution and carbon emissions would be greatly decreased as well.

If a longer journey was required, an improved combustion engine could provide the energy needed to keep the electric motors spinning. They might consume synthetic or renewable fuels to keep carbon emissions steady. The demand for cells and raw materials would be reduced as a result.

With the passage of time and advancements in battery technology, we may be able to produce more pure electric vehicles. What does not appear reasonable is the expectation that we will be able to switch all automobiles to battery power as quickly as some claim. This is likely why some automakers continue to invest in fuel cells despite the lack of a hydrogen refuelling network: they want to have something to sell when the cell shortage finally arrives, as it appears to be doing presently.

Ignore any claims that state-owned electric vehicles are bad for the environment. They aren't. The actual concern is ensuring that they have all of the batteries they will require. Recent developments in the automotive sector demonstrate that this will be a difficult problem to address. Ignoring this now, when there is still time to correct the problem, may make things worse in the future.

Advertisement