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The Bad News That Elon Musk Shared and Everybody Missed

Tesla CEO Elon Musk, right, and battery chief Drew Baglino at Battery Day. Credit: Steve Jurvetson / Flickr

Last week, Tesla CEO Elon Musk crowed about the company’s first $1 billion quarterly profit—its eighth consecutive profitable quarter—and seemed to leave behind the relentless specter of imminent corporate bankruptcy that had previously dogged him. 

Musk, however, also made a much-overlooked disclosure during Tesla’s second quarter earnings call: Two of his proudest new innovations were stuck. (More on that below.) These projects, combined with others he unveiled last fall during his Battery Day event, promised to cut the cost of Tesla batteries by more than half and help bring $25,000 EVs to the mass market.

The new problems Musk disclosed mean that 10% of the anticipated reduction in battery cost will be significantly delayed and may not happen at all. The situation also seems likely to hold up the launch of Musk’s Cybertruck until next year, putting it on a collision course with the electric version of Ford’s F-150, the world’s best-selling pickup, which is also slated to launch then. And Musk said the debut of another vehicle, the long-haul Tesla Semi, would be pushed to 2022 from this year, too.

In the past, Musk could be late to deliver on his promises and not face much consequence. This time, though, legitimate competition is on the way, and EVs being produced by companies not named Tesla have attracted a wellspring of customer enthusiasm.

While parsing the earnings call and writing about Musk’s consequential move to iron-based batteries, I read Power Play, Tim Higgins’ richly detailed new book on Tesla and Musk, which goes on sale Tuesday. While Musk is one of the most closely watched and polarizing individuals on the planet, Higgins manages to deliver an evenhanded account that brings us up to date from Ashlee Vance’s 2015 biography of Musk—the prior definitive Tesla account—and has a more urgent feel, given everything that has happened the past few years.

Had Higgins still been researching the book last week, he no doubt would have taken note of the conflicting news—Tesla’s outsize profit juxtaposed with its innovation snafu—as yet another set piece in the familiar narrative loop of Tesla’s 18-year history: Musk sets an improbable stretch goal, which ignites deeply divided opinion as well as rumors of impending failure, leads to a crazed all-hands-on-deck effort by Tesla’s team to reach the goal, and ends in Tesla somehow pulling it off and moving closer to upending the $3 trillion car and truck market.

4680 Problems

The problems that Musk disclosed last week involve a new battery that he has dubbed the “4680,” a gigantic (by battery standards) cylindrical cell, 46 millimeters by 80 millimeters, that has sparked the interest of the global battery community because of the clever twist it proposes for traditional lithium-ion. The idea is not only to make the battery cells bigger, but to use a new approach to packing them into a vehicle—cell to pack, which I wrote about last week—and to reconfigure how energy is carried out of the battery, which Musk calls “tabless.” These methods manage to get rid of damaging battery heat and eliminate the need for expensive modules and packaging that help keep the batteries from catching fire. Musk calls his version a “structural” battery pack.

Among the other innovations he described last fall during Battery Day was “dry electrode coating,” a new process for creating the two electrodes involved in every battery. Normally, creating commercial-scale batteries involves starting with tons of electrode powders, mixing them with water or solvent to create great quantities of slurry, and then coating that onto metal foil to create an electrode. But first the electrode must be dried in gigantic ovens, and then the solvent has to be removed. At Battery Day, Musk’s battery deputy, Drew Baglino, said the company would forgo the oven, “skip that solvent step…, and just go from dry mix to coat.”

Baglino and Musk went on to describe a coating system that reduces the factory space required to make the electrodes to one-tenth of its former size, decreases the necessary energy that goes into battery production by the same amount, and cuts the battery’s cost by about 10%. They hadn’t completely worked out the kinks, the men said, but they were on their way. “There’s a clear path to success,” Musk said. “This is a really profound improvement. For people who know battery manufacturing, this is gigantic.”

Last week, the men said something different. First, the dry-coating process still wasn’t working. Baglino said the problem was not fundamental science, but something that required a simpler engineering solution. Their second point was that dry coating wasn’t that important after all. “We don’t want to overemphasize dry cathode,” Musk said. “Maybe it’s 10 or 15% of the cost improvement or something like that.”

“Closer to 10,” Baglino said, helpfully.

Musk continued: “Now, 10% is still not something to sneeze at, especially if you’re making hundreds of gigawatt-hours a year. But it’s not the messiah.”

The meaning was clear. Dry coating isn’t happening, at least not anytime soon, and neither is the 10% in cost savings.

Musk, right, and Baglino describe the 4680 at Battery Day. Credit: Tesla

‘Pizza Dough’

That wasn’t the main problem, though. The 4680 could still come to life without dry coating. But it couldn’t if the electrodes themselves couldn’t be made—and that was the other disclosure the men made. Remember the coating process, applying the slurry to the sheets of metal foil? That coating has to be a smooth, uniform layer. To make it that way, the coated foils are squeezed through huge rollers in a process called “calendering.” Musk said during the call that the slurry “goes through these rollers and gets squashed like pizza dough, basically, but very hard pizza dough.” Musk’s metaphor was apt because calendering is a routine and uncomplicated part of battery production, just like rolling pizza dough—a necessary step that everyone takes for granted.

With the 4680, though, calendering isn’t working. Specifically, Musk said last week, “it’s denting the calender rollers” and that he and his team “weren’t expecting that.” Again, Baglino assured the audience: “It’s not a science problem. It’s an engineering problem. It’s not a question of if. It’s a question of when.” Yet Musk wasn’t 100% confident that it would be solved in time to use the 4680 for the new version of the crossover Model Y later this year, as Tesla had previously announced. “We have a backup plan with a nonstructural pack and 2170s,” he said, meaning using smaller batteries without cell-to-pack technology. But the backup plan meant the SUV would offer none of the cost savings he described on Battery Day.

The news flummoxed the small but global community of battery practitioners, who are unaccustomed to calendering problems. In a dedicated Slack channel for battery talk, many of them agreed with the theory proposed by Hongyi Lin, a doctoral student at Carnegie Mellon University and a former engineer at Chinese battery giant Contemporary Amperex Technology, about what was going on. Tesla’s problem, Hongyi suggested, is that 4680 electrodes are both relatively large and thick. In the rules of battery physics, the larger the cell area, the greater the possibility of defects. And when the cathode is thick, more calendering pressure must be applied to make its metal particles—nickel, manganese, and aluminum, in Tesla’s case—flat and smooth. When you calender a 4680 nickel-manganese-cobalt or nickel-cobalt-aluminum cell, the result is a battlefield of crushed and fractured particles, Hongyi said.

The assumption among battery experts was that Musk would eventually figure it out. But no one could be sure, since no one had ever commercially produced a cylindrical battery as big as the 4680 for EVs. For now, Baglino made it clear on the call that this was the all-hands-on-deck stage for Tesla’s next battery.

‘Musk’s World’

In 2018, when Higgins started researching his book, there was no such confidence that Musk could solve Tesla’s biggest problems. Higgins thought he was documenting Tesla’s demise, and it’s easy to see why. Senior executives were dropping like flies: By Higgins’ count, at least 50 vice presidents or higher-ranking executives were either fired or quit from 2016 to 2018, many of them the object of a Musk dressing-down in front of other workers. Quality was also an issue: Model after model—the Roadster, the S, the X—reached the public by the skin of Tesla’s teeth, and the company only managed it by putting inferior, flawed vehicles on the streets first. “The doors wouldn’t shut, the windows didn’t work,” or they “made a horrible screeching sound when going up or down,” Higgins wrote about early Model X SUVs. The problems added up until, in 2016, automobile data company JD Power declared Tesla “the worst among luxury brands, and among the worst in the industry across the board.” 

Complaints about quality control and indifferent customer service continue to plague Tesla. But Musk’s enduring magic touch—personal charm, a relentless push for the technological edge, and a seemingly unerring sense of what is cool and elegant—has kept his company well ahead of the pack.

Tesla’s story is very much of our billionaire-dominated times—of one person bending the world, or in this case the world’s auto companies, major governments and future motorists—to his will. Over the last year or so, one major automaker after another has conceded, though typically without saying so, to Musk’s vision by going electric and fating the rest of us to the same outcome. Higgins’ book might as well have been titled, “It’s Musk’s World Now.”

But the automakers may be inferring the wrong message from Musk’s success. From the beginning, Musk has said that he intends to make cool cars that happen to be electric. And, in a Zoom chat, Higgins told me that this is precisely what he has done. But, with a few exceptions, GM, VW and other major automakers have done the opposite—made electric vehicles that aren’t cool. And by and large, customers have not bought them. The upcoming electric F-150 and other entrants could change that next year. But at this point, Musk hasn’t proven that most people are ready for electric vehicles. The real test will come when EVs are at mass-market prices, in the mid $20,000s and below. Tesla investors and Musk himself have bet that he will pass that test and continue to dominate the industry. “It’s kind of the bet of the century,” Higgins said.

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About Steve LeVine

Steve LeVine is editor of The Electric. Previously, he worked at Axios, Quartz and Medium, and before that The Wall Street Journal and The New York Times. He is the author of The Powerhouse: America, China and the Great Battery War, and is on Twitter @stevelevine

Email Steve

Steve LeVine is editor of The Electric. Previously, he worked at Axios, Quartz and Medium, and before that The Wall Street Journal and The New York Times. He is the author of The Powerhouse: America, China and the Great Battery War, and is on Twitter @stevelevine
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