Tesla Energy admits slowdown of Powerwall battery production

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As EV production ramps up, Tesla has had to ramp down production of Powerwall batteries, due to being “cell starved.” But not for long.

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After a Q2 results announcement that bounced shares up by 16 per cent, Tesla has revealed that it has had to “artificially limit” the production of its residential Powerwall battery units, to prioritise the production of cells for its Model 3 electric vehicle production.

As we report here, Tesla shares made their biggest one-day jump in nearly five years this week, after second quarter results call that featured promises of a sustained production rate of 7,000 cars a week and a “sustainably profitable” business from Q3 onwards.

But what’s been good for the EV division – and for revenue, which was rose to $US4 billion from $US2.77 billion a year ago – appears to have tapped the brakes on Tesla’s energy department, and more specifically, in its production of its 13.2kWh Powerwall 2 batteries.

“We’re kind of cell starved for Powerwall right now, so we actually had to artificially limit the number of Powerwalls because we don’t have enough cells,” Musk said on Wednesday during an earnings call.

“So we’re solving … that very rapidly and we expect to ramp up Powerwall and Powerpack production substantially later this year and early next and as well as ramping up retrofit solar and then the Solar Roof.

But having said that, Musk and his top executives were keen to note that this was a temporary situation –  and to put it in perspective against the company’s general “insane” growth rate for battery production.

“…It’s a partial-sum game. We did shut down a Powerwall cell line in favor of Model 3 to be totally honest but we kind of had to do that. But we’re adding new cell lines and we’ll be able to address that issue very soon,” Musk said.

“Yeah, as Elon suggested earlier, we are – essentially makes sense for us to prioritise Model 3, but we are adding a ton of capacity, cell capacity and … that will enable us to dramatically ramp our energy storage business as well in the coming quarters,” added Tesla CFO Deepak Ahuja.

“Yeah, you kind of mentioned only 1 gigawatt hour. But that’s a big number in that business. And that’s maybe on the order of 300 per cent what we did the prior year and we’re still aiming at maybe another 3x to 4x growth for 2019,” added JB Straubel, Telsa’s chief technology officer.

Musk: “These are mad – at scale, these are insane growth levels.”

Jeffrey B. Straubel:Crazy growth rate.”

Deepak Ahuja: “I think to put it in perspective, we are soon tripling our storage. …And it’s one thing to produce, but it’s also another thing to install. …You need infrastructure and the people to do that. So, it’s massive scaling as very few companies grow at that rate.”

Elsewhere in the Tesla Energy division, Musk noted that the company now had several hundred homes with the Solar Roof installed on them, and that “that’s going well.”

Musk said the company was still in the process of confirming that the Solar Roof would actually last for 30 years, and was also working with first responders to make sure it was safe in the event of a fire “and that kind of thing.”

“So it’s quite a long validation program for a roof which has got to last for 30, 40, 50 years, but we also expect to ramp that up next year at our Gigafactory 2 in Buffalo,” Musk said.

“That’s going to be super exciting. If there’s a company with a better product roadmap, I’d like to know where it is, because we’ve got some super awesome stuff coming. Yeah.”

Sophie Vorrath

Sophie is editor of OneStepOffTheGrid.com.au and deputy editor of its sister site, RenewEconomy.com.au. Sophie has been writing about clean energy for more than a decade.

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11 Comments
  1. Mike Westerman 4 months ago

    And therein lies a tale… It seems highly likely that increases in production of cells will feed the growth of EVs and hold the price of cells up. There is so much pent up demand for cells that surely profits will be channelled back into production increases from metal production right thru, rather than price falls

    • Peter F 4 months ago

      And wouldn’t any sane business do the same, particularly one as cash hungry as Tesla

    • GlennM 4 months ago

      True,
      but also true for the whole industry. Currently cells are not dropping in price as demand exceeds supply, it is expected that this will stay the same for a few years yet. Classic S curve stuff has been the same for just about every product in history.

      • Alastair Leith 4 months ago

        Powerwall 2 was a dramatic price leap on power wall 1 in a short space of time.

        • Deevo 4 months ago

          Well it is twice as big after all!

    • Alastair Leith 4 months ago

      Yep even if someone came along with a new fab process or different chemistry that dramatically undercut the bleeding edge of today, they’d probably not undercut on price, just because it would take them a few years to ramp production up to even take market share from Tesla & other providers.

    • Ian 4 months ago

      Tesla is primarily a car company, their home market is the USA where there are large waiting lists for their motor vehicles, the gigafactory was built to provide batteries for cars. Powerwalls are a sideline to be sure.

      However, consider this : In the USA powerwall 2 (13.5kWh) costs $5900, not installed, which is $440/kWh. Not a bad cash earner considering their cell costs are apparently approaching $100/kWh. To keep their motor vehicle costs down, the added value to the battery pack is most likely closer to the OEM ;( base model 3: $46000, battery pack 80kWh ie $575/kWh) . Clearly, then, the Powerwalls are a money-spinner – excellent pocket money whilst they continue the real business of producing cars. If the Chinese mob beat Tesla on current prices, then for Tesla to match and better them is no big deal.

  2. MacNordic 4 months ago

    There was a story the other day about Panasonic adding 30% production capacity (3 new lines/ 10 existing) at GF1 in Sparks. Full capacity after completion: 35GWh/a
    [source: https://cleantechnica.com/2018/07/31/breaking-panasonic-to-increase-gigafactory-cell-production-more-than-30-by-end-of-2018/%5D

    Even at an average battery size of 80kWh per car, that would be good for some 437.500 cars per year.
    Note the average size of batteries will most likely go down significantly once the Standard Range Model 3 is manufactured:
    Currently there is an artificially high demand on battery cells due to the concentration on production of the LR model: all M3 are currently delivered with a 75kWh battery; later there is likely going to be a significant dip in battery requirements (Q1/2019) once the LR reservations are worked through and a much higher proportion of SR M3 need to be produced.

    Guesstimate:

    Assuming an order mix of around 1:3 for the LR/SR models (450.000 reservations/ 120.000+LR versions produced this year), this would mean an average battery size of 56.5kWh for the model 3.

    Adding the S& X models (note that they utilise a different cell form factor and therefore different manufacturing lines!) with battery sizes of 75, 90 and 100kWh (AFAIK) with an average of 89kWh (assuming equal shares of sales).
    At a sustained production rate of 50.000 per S& X each, they would consume 8.9GWh of cell production.

    The energy storage business uses 1GWh currently (mentioned above), an “insane ramp” might be to 3GWh in the short term.

    That leaves 23.1GWh for the M3 – or 412.500 cars, a production rate of 8,250 units per week, targeted for H1 2019. But then there will be a much higher rate of SR models being produced, as the LR mods have been mostly done this year, so battery production capacity might be good for 8.900 cars per week.

    They will have plenty of time to see the real, sustained order mix and add a battery line or two, if needed. Word is that the currently envisaged capacity at GF1 is 50GWh…

  3. Frank 4 months ago

    China needs to really get rolling on stationary storage production. The Powerwall is a nice Apple watch type product, but the gaps need to be filled at a commodity level. Make me a durable $2k 20kWh clunker of a battery China!

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