Analysis-Tesla’s battery plan is under scrutiny as Musk waives features Reuters

By Hyunjoo Jin

(Reuters)-Tesla (NASDAQ:) has weathered the pandemic and supply chain crisis better than many competitors, achieving record deliveries last quarter. But CEO Elon Musk is facing pressure to deliver breakthrough batteries, as well as new factories and new models, all of which are too late.

When the electric car company announces its results on Monday, these issues, China’s demand, and the financial impact of the sell-off will come to the minds of investors.

In September last year, Musk announced an ambitious plan to use new design and manufacturing processes to produce his own batteries.

In theory, larger and easier-to-manufacture batteries will have higher energy density and can expand the range of existing cars, allowing Tesla to launch a car priced at $25,000 within three years, and a flood of competitors Strengthen its technological advantages on the occasion of the electric vehicle market. But Musk cancelled the Model S Plaid+ with the longest range last month and postponed the debut of the 4680. He had said that he would use batteries, which caused people’s concerns. He once said that the 4680 will be put into mass production next year and will be used in the Model Y in the Texas factory under construction. Two people familiar with the matter told Reuters that Tesla’s goal is to start small batch production of cars equipped with 4680 batteries this year, and these cars have not yet been finalized. One of the people familiar with the matter said that Tesla will initially use batteries produced by Tesla on the California trial production line, adding that they are being tested on prototype cars.

He said that Tesla also worked closely with Panasonic (OTC:) to develop the 4680 battery. According to Reuters earlier reports, another Tesla supplier LG is working to produce 4680 batteries for Tesla by 2023.

But industry officials said that it is not yet clear when Tesla will be able to mass-produce new batteries in Texas and Berlin and be able to achieve all its ambitious battery goals.

Musk said when talking about the dry battery electrode manufacturing process he is developing: “It takes a lot of engineering to use Maxwell’s proof of concept for high-quality mass production, and we have not yet fully completed it.” After the acquisition of Maxwell.

Tesla could not be reached for comment.

MODEL S PLAID Although larger-volume competitors often suspend production due to supply problems, Tesla has largely kept the factory running. It also cut some features and increased car prices, including from April to late July, the long-range Model Y increased from $4,000 to $53,990. The move comes as Tesla is preparing to welcome the decline in its Bitcoin investments and sales of environmental credits to other automakers, which is the source of income the company relies on for its quarterly profits.

A person familiar with the matter said that due to chip shortages, Tesla has accelerated plans to remove radar sensors from its driver assistance system and canceled the adjustable lumbar support of the passenger seat. “When it is almost never used, it is not worth the cost/quality for everyone,” Musk wrote on Twitter. “Tesla adapted to their needs very quickly,” said Ross Gerber, an investor and CEO of Gerber Kawasaki Wealth and Investment Management.

“I just didn’t see any huge catalysts, like, oh, their numbers this quarter will burst,” Gerber said. “Our view of the third quarter is more optimistic than the second quarter,” Gerber said, and he expects Tesla to increase production of the more profitable Model S Plaid.

Soon after its launch in June, one of the high-end models caught fire while the owner was driving. China China’s roller coaster has raised political and competitive challenges in Tesla’s second largest market.

Due to consumer complaints, quality issues and negative publicity from regulatory pressures, Tesla’s sales in China fell in April. According to an advertisement in the showroom, Tesla’s sales rebounded in May and June as Tesla launched quarter-end promotions such as loan discounts. The automaker also launched a cheaper Model Y in China this month.

“China is the key to the bull market theory,” said Daniel Ives, an analyst at Tesla’s bull market and Wedbush Securities. “You need to see a slope in the second half of this year,” he said.