Tesla‘s push to start handing over a portion of its battery pack production to suppliers during the Model 3’s changeover window is a choice it made after remeasuring costs, according to local media.
Tesla (NASDAQ: TSLA) is using the window of the upcoming Model 3 and Model Y revisions to adjust its battery pack production strategy at its Shanghai plant and will rely more on suppliers, according to a report today by 36kr.
Tesla recently stopped production of the phase 1 battery line within its Shanghai Lingang plant, a more aggressive cost-control move it has chosen in the face of increased competition, according to the report.
For electric vehicles (EVs), battery cells and modules — the components of the pack — are typically produced by the battery manufacturer, while some EV makers choose to assemble their own packs to gain greater autonomy.
The practice of Tesla’s Shanghai plant is to assemble its own battery packs, and there are three battery factories, phase 1, phase 2 and phase 2.2, in its facility in Shanghai Lingang, according to 36kr.
The discontinued phase 1 battery factory was built early, but the capacity was not large. The low level of automation in the phase 1 factory no longer fits Tesla’s needs, and it will be replaced by phase 2.2 to complete some of the battery pack production, the report said, citing people familiar with the matter.
The phase 2.2 battery plant was built just over six months ago, and late last year, Tesla’s two battery suppliers in China, CATL and LG Energy Solution, entered the plant to provide services and allow production capacity to gradually creep up.
Currently, the phase 2.2 plant has more than half of the capacity of the phase 1 plant and can exceed the capacity of the phase 1 plant at full production, according to 36kr.
Tesla’s past battery production strategy has been to get battery cells or modules from suppliers and subsequently assemble and produce battery packs on its own, the report said, adding that the benefit of doing so is to have a better grasp of the production rhythm and also to reduce dependence on suppliers.
But this strategy is not set in stone, especially as new battery pack technologies emerge and some car companies gradually abandon the practice of assembling their own packs.
Tesla’s push to hand over a portion of its battery packs to suppliers during the window of the Model 3’s upcoming facelift began as a choice made by the automaker seeking extreme cost control after remeasuring, the report said.
For Tesla, shifting a portion of battery packs to suppliers during the model switch window is good for further cost reduction and ensuring supply efficiency, the report said.
Tesla is preparing for a revamped version of the Model 3, a project codenamed Highland, as previously reported by Reuters.
Earlier today, local media outlet Jiemian reported that Tesla’s Shanghai plant is close to completing production line tuning of the updated Model 3.
On June 29, 36kr reported that Tesla’s revamped China-made Model 3 will have an upgraded battery pack, with the base rear-wheel-drive version using CATL’s new M3P lithium iron phosphate battery, which will be upgraded from 60 kWh to 66 kWh in capacity.
Tesla has a practice of upgrading its batteries with every facelift, and previously, the standard range version of the China-made Model 3’s battery pack has been upgraded from 55 kWh to 60 kWh, the report noted.
The 66-kWh pack is not only available for the revamped Model 3, but can also be used in the future revision of the Model Y, the report said, citing sources.
With the new Model 3 battery upgrade, Tesla will most likely have CATL or another battery maker produce some of the packs due to high manufacturing costs, a person familiar with the matter said, adding that Tesla’s Shanghai battery factory will reduce the percentage of battery packs it produces itself, according to the 36kr report today.
If Tesla models use new batteries, the BMS (battery management system) will need to be strictly adapted, making it more necessary and efficient to hand over the production of battery packs to suppliers, the report said, citing an industry source.