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Tesla’s Move to LFP Shows a Worrying EV Trend: We’re Running Out of Cells

At Tesla’s Q3 2021 earnings call, Lars Moravy said fans should not worry about the $25,000 car that some still insist on calling the Model 2. Not because it is on its way but rather because we live in a “cell constrained world.” That explains a lot of the backstage in the automotive industry and raises an alert: we’re running out of cells.
We May Not Have All the Batteries That We Need Pretty Soon 11 photos
Photo: Daimler
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More specifically, Tesla’s vice president of vehicle engineering said that it will not add any new vehicles to its lineup. To do that, Tesla depends on “increasing cell capacity, both from our suppliers and through our inherent cell.” The idea will be to expand sales of current products “while there is still more runway to grow these existing products,” focusing on the Model Y.

This cell restriction explains Tesla moving to LFP cells for all entry-level derivatives of the Model 3 and Model Y. What started as a test in Shanghai became the norm not only because these batteries proved to be suitable for Tesla or cheaper and more robust. The real advantage they brought to the company was sparing ternary cells for more expensive vehicles. Moravy said the first new vehicle to be presented will be the Cybertruck.

With the production expansion Tesla plans to have with two new factories (Austin and Grünheide), it will need way more batteries than it uses now. In other words, it will either need to increase battery manufacturing at Giga Nevada or to produce its own cells in Austin and Grünheide.

That was part of the plan with 4680 cells. The problem is that the development of these batteries was not as fast as Elon Musk expected, and the plants will start operations without the cells they were intended to produce. Tesla’s only option will be to buy them from anyone willing to sell them. This is what may have pushed the BYD deal – if it gets to be confirmed.

Other companies have been announcing new factories every week. Stellantis was the most recent one to do that. It said it would have a joint venture with LGES (LG Energy Solution). A week later, it disclosed it would have another one with Samsung SDI. We are expecting it to talk about “multiple battery plants” thanks to new contracts. So far, it revealed only 80 GWh of the planned 260 GWh it intends to have until 2030. And that is just the beginning.

Governments are imposing limits for combustion engine manufacturing as if there were going to be cells for all automakers to simply switch to electric motors. It is now clear that this will not be the case. Some companies will be left with no option but to sell something else or just give up making cars, especially the ones that did not run to ensure a steady supply of cells.

There’s a substantial risk that this political push toward electrification without proper planning will lead to a car shortage. That’s pretty much what happened with electricity when governments deactivated nuclear power plants without providing the renewable energy power plants to keep up with Europe’s demand.

Energy prices are increasing, and most governments have no idea what to do. Some of them are reactivating coal power plants, which was right the opposite of what their efforts were supposed to deliver. Decarbonizing the economy became a secondary issue when things got ugly with energy generation.

JB Straubel called people’s attention to that in an interview with “This Week in Startups.” According to the former Tesla executive, “everyone wants to switch to electric cars at the same time.” Straubel said that batteries and their components will be missing. He shared concerns with cathodes, separators, and raw materials such as nickel, 4680 cells’ main ingredient. That was why he started Redwood Materials in the first place: to try to make sure no shortages would happen.

In that sense, and considering how making all cars electric all of a sudden may impact the supply chain, pushing for a slower adoption may not be as against the environment as Greta, and other kids would think. Plug-in hybrids (properly made) could be a sensible solution, for example.

By having enough range for daily commutes with smaller battery packs, they would save cells and allow for the production of more vehicles. Pollution and carbon emission would also be significantly reduced.

If a more extended trip was necessary, an optimized combustion engine could generate the energy required for the electric motors to keep spinning. For carbon emissions to be stable, they could burn synthetic or renewable fuels. That would reduce the demand for cells and raw materials.

With time and battery improvements, we could eventually achieve more pure electric cars. What does not seem feasible is to expect that we’ll be able to convert all vehicles to battery use as swiftly as some think it is possible. This is probably why some carmakers still invest in fuel cells despite not having a hydrogen refueling network in place: they want to have something to sell when cell shortage really hits us, as it is now only promising to do.

Forget about all fallacies that state electric vehicles are worse for the environment. They’re not. The real issue with them is ensuring all the batteries they will need. The recent automotive industry moves show that this will not be easy to solve. Ignoring that while we still have time to fix this situation may make things worse in the future.

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About the author: Gustavo Henrique Ruffo
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Motoring writer since 1998, Gustavo wants to write relevant stories about cars and their shift to a sustainable future.
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