Almost half of Tesla EVs produced in Q1 had no nickel, cobalt in battery

Electric vehicle maker Tesla equipped almost half of the EVs manufactured in the first quarter of 2022 with nickel and cobalt-free lithium iron phosphate, or LFP, batteries, it said in its first-quarter results presentation April 20.

The company is using LFP batteries in most of its standard range vehicle products, it said, as well as in commercial energy storage applications, noting that a Model 3 Tesla with an LFP battery pack could still achieve a 267-mile range, due to its energy efficient motors.

"Diversification of battery chemistries is critical for long-term capacity growth, to better optimize our products for their various use cases and expand our supplier base," it said.

Tesla announced in October 2021 that it would be shifting to LFP cells for all its standard range vehicles globally.

LFP batteries have been increasing in popularity, with recent technology breakthroughs at the battery pack level increasing the driving range of these batteries without compromising price and safety advantages.

Tesla said earlier in April that total Q1 EV production rose 69.4% year on year to 305,407 units.

Of the production total, 14,218 were the Model S/X, up from zero produced in Q1 2021, and 291,189 were Model 3/Y vehicles, rising 61.5% year on year.

It also delivered a record 310,048 vehicles in the first quarter, up 67.8% year on year, of which 14,274 were Model S/X units, well above the 2,020 units sold in Q1 2021, and 295,324 were Model 3/Y units, up 61.6% year on year.

The EV maker plans to grow its manufacturing capacity as quickly as possible and said in the results that it expected to achieve 50% average annual growth in vehicle deliveries, although the rate of growth would depend on its equipment capacity, operational efficiency and the capacity and stability of the supply chain.

Supply chain challenges

Like most automakers, Tesla also continued to experience supply chain challenges.

"In addition to chip shortages, recent COVID-19 outbreaks have been weighing on our supply chain and factory operations," Tesla said.

It said its factories had been running below capacity for several quarters, with the supply chain the main limiting factor and it expected this to continue through the rest of 2022.

Gigafactory Shanghai was particularly affected, with the company noting that, while weekly production in Shanghai was strong in the first quarter, a spike in COVID-19 cases had resulted in a temporary shutdown at its factory as well as parts of the supply chain.

It had restarted limited production at Shanghai since, but was continuing to monitor the situation closely, the company said.

During the first quarter, the company started deliveries of Model Y vehicles from its Gigafactory Texas and Gigafactory Berlin-Brandenburg and said it was also "putting significant efforts into in-house cell production, raw material procurement and supplier diversification."

It said the pace of production ramps a the two new gigafactories would be affected by the successful introduction of new product and manufacturing technologies in new locations and ongoing supply chain related challenges.

"Factory ramps take time, and Gigafactory Austin and Gigafactory Berlin-Brandenburg will be no different," Tesla said.

Higher raw material costs

The company said it had also been affected by prices of some raw materials increasing "multiple-fold" in recent months.

"The inflationary impact on our cost structure has contributed to adjustments in our product pricing, despite a continued focus on reducing our manufacturing costs where possible," it said.

Battery metal prices have been moving from strength to strength in 2022, with S&P Global Commodity Insights Platts lithium carbonate gaining 128% since the start of the year to be assessed at $77,000/mt CIF North Asia April 20 and the lithium hydroxide assessment also gaining 159% over the same period to $82,000/mt CIF North Asia.

The 30% Co cobalt hydroxide assessment closed at $34/lb CIF China April 20 for spot cargoes aligned to Platts methodology, loading 15-60 days out, up 23% since 2022 began, according to S&P Global.