Source: Late LatePost Author: Li Zinan

This is far from the goal of the 4680 battery when it was released in 2020. At the time, Musk wanted to use new structures and manufacturing methods to cut battery costs in half, so that$Tesla (TSLA.US)$The car establishes a price advantage.

Eggleston, the new head of 4680's battery division, was previously the senior director of 4680 Battery, responsible for the battery manufacturing project. After taking office, he reported directly to Musk and also managed the battery materials department. Prior to the new appointment, Tesla's battery materials department had already cut half of its staff, while the highly regarded 4680 battery division had more than 20% of its employees, leaving only about 800 people.

Two people familiar with the matter said that at the beginning of this year, Tesla executives proposed the 4680 division's goal of making self-produced batteries cheaper than suppliers.

Battery division managers were told at the time that Tesla might abandon the 4680 project if this goal is not achieved by the end of the year.

We also learned that Tesla cut more than 50% of the US model design team last week, and that engineering, factory software and other departments are also still laying off staff.

According to media reports, Tesla America as a whole is expected to lay off about 6,000 more people by the end of June.

After the target shrinks, the 4680 battery has limited competitiveness

Prior to this layoff, Tesla's revenue declined, and gross margin from car sales fell to its lowest point since 2017. Sales in the first quarter fell 8.5% year on year, the first time in 15 quarters.

Tesla's plight is related to the slowdown in the growth rate of electric vehicles in Europe and the US and the intensification of competition in the Chinese market, but the core reason is that products are out of date. Over the past few years, Tesla has been obsessed with drastically transforming automobile production methods and pursuing drastic cost reduction using leading technology. This is a “manufacturing capability” that Musk is proud of. He said in 2022 that Tesla's core competency is manufacturing capability.

The 4680 battery is at the core of Tesla's reliance on technology to reduce manufacturing costs. In 2020, Musk claimed that this battery could reduce the battery cost by 50%, provided that Tesla can overcome the dry cathode and anode processes, and the positive and negative electrodes are the most expensive components of the battery.

However, as of March of this year, the annual production capacity of 4,680 batteries is only enough for 60,000 Cybertrucks, and the cost is far higher than expected, so Tesla is still unable to mass-produce dry cathodes.

Tesla is now choosing to understand the facts and pursue simpler goals. The clear assessment criteria proposed by Tesla management at the beginning of this year is that by the end of this year, Tesla's self-produced 4680 batteries will cost less than the 4680 batteries from suppliers such as LG and Panasonic.

Digital 4680 battery engineers think this goal can be achieved. They believe that as long as Tesla is no longer obsessed with self-production of positive poles, and is willing to buy positive electrodes from outside, and concentrate on increasing production capacity, yield, and diluting costs, the 4680 battery project is likely to achieve the task of reducing costs before the end of the year.

The departure of Drew Baglino (Drew Baglino), the former head of Tesla's Sanden and general manager of the 4680 battery project, may have cleared the barriers to implementing this strategy.

A Tesla engineer said that one of the differences in the previous 4680 development process was that Musk believed that a usable battery should be made first and then continue to iterate, but Baglino insisted on breaking through the positive dry method rather than optimizing manufacturing efficiency in terms of transition plans.

Eggleston, who took over from Baglino, joined Tesla 7 years ago as a battery engineer and battery manufacturing engineering director. Previously, he had ten years of experience in the photovoltaic manufacturing industry.

An engineer close to the department said that Eggleston has yet to make major adjustments to the 4680 battery business after taking over. At today's 4680 department meeting, apart from appeasing everyone's battery department's layoffs, he did not release any further information.

Some 4680 project engineers feared that the importance of the 4680 battery would be greatly reduced if only this “simple version of the goal” were met.

In the nearly 4 years since the 4680 was released in 2020 and mass production began at the end of 2023, companies such as Ningde Times and BYD have reduced the battery cost to 0.4 yuan/Wh. However, even if the cost reduction target is achieved by the end of this year, based on information from many engineers and industry figures, the cost of the 4680 battery will probably still be in the 0.8-1 yuan/Wh range, which is double that of the Ningde era and BYD batteries, and the safety, cycle life, and charging speed of this battery are weaker than mainstream batteries.

The 4680 battery can no longer be Tesla's “key weapon” to reduce costs in the short term. Musk said during the first quarter earnings call that Tesla would consider buying more batteries from suppliers.

The car and factory departments are in an even worse position

The 4680 battery division also has a chance to prove itself; other departments responsible for improving manufacturing efficiency are in a worse position.

People familiar with the matter said that Tesla cut more than 50% of the personnel in the US model design department last week. Their previous tasks included designing a $25,000 next-generation affordable car; the factory software team responsible for optimizing assembly line production efficiency was also drastically cut.

Tesla's series of manufacturing innovations came to a standstill before and after layoffs.

Last week, Tesla suspended research and development on a larger one-piece die-cast body. Tesla Mexico's next-generation gigafactory, which was supposed to be put into operation this year, has yet to start construction.

In early April, according to media reports, Tesla delayed the original $25,000 budget car plan. A number of people familiar with the matter said that Tesla will launch another hatchback next. This car will only be improved on the Model Y, reducing costs by reducing the configuration, and is no longer an affordable car with drastic changes from the battery to the body process to assembly line production methods.

Combined with current layoffs and adjustments, Musk has temporarily put aside his ambition to reshape manufacturing methods. Tesla may no longer be obsessed with building a car in a shorter period of time, but instead pay more attention to intelligent driving systems that are not directly related to manufacturing.

“FSD V 12 has greatly increased Musk's confidence in autonomous driving and sees the need for a change in strategy.” A Tesla employee said.

FSD (Full Self Drive) v12 is Tesla's latest intelligent driving software system released in January this year. Musk said on his social networking platform X that FSD v12 is a 99% “end-to-end” system, and driving is more like a human. For example, when someone is riding a bike in front of the right side of the vehicle, v11 will perform a larger detour route, while v12 will take a lighter and smoother detour like a skilled human driver.

On the day the media reported that Tesla suspended its budget car program, Musk said on X that Tesla's unmanned taxi will be released on August 8 this year.

Musk also said at the first quarter earnings conference that he plans to invest 10 billion US dollars in the autonomous driving business this year.

The consequences are left to many executives, and Musk continues his aggressive adventures

The senior personnel changes and turmoil brought about by this layoff have also concentrated Tesla's management and decision-making power more on Musk.

Before the end of last year, in addition to Musk, Tesla also had three core managers, namely CFO Zachary Kirkhorn (Zachary Kirkhorn), senior vice president of Sandian Systems, Baglino, and Zhu Xiaotong, senior vice president responsible for global manufacturing and sales in the European and American markets.

Less than half a year later, only three core executives remained Zhu Xiaotong. CFO Zack Cockhorn left his job at the end of last year, and Sandian Vice President Baglino left last month. Zhu Xiaotong's scope of work and responsibilities also changed in April of this year: he re-assumed the position of Tesla's head in China, and Musk personally took over the European and American sales business that he was responsible for. According to media reports, before April, Zhu Xiaotong had 25 direct subordinates, but now there are only 10, and they are all in Asia.

Since the end of April, several Tesla executives have also left their jobs: Allie Arebalo (Allie Arebalo), senior director of human resources, Daniel Ho (Daniel Ho), head of new car projects, and rich Otto (Rich Otto), head of product launches. Martin Viecha (Martin Viecha), vice president of investor relations, will also leave their jobs at the end of June.

Zhu Xiaotong's Cybertruck project is still in production capacity hell. Baglino's 4680 battery was delayed for two years before mass production was carried out on a small scale. The direct reason for the job adjustments and departure of these two executives appears to be a problem with the business they are in charge of.

But the root cause of this series of difficulties cannot be circumvented by Tesla's ultimate decision maker, CEO Musk. According to the records of “The Biography of Musk,” it was he who ordered a public discussion and asked Tesla to make a Cybertruck with a stainless steel body. Cybertruck's stainless steel process challenges caused the product to be delayed for 3 years, and so far production capacity is only half of the target. Half a month ago, Tesla recalled 3,800 Cybertrucks due to safety hazards with accelerator pedals. Tesla has been adhering to the “hard core culture” for a long time. The same department often has only a fraction of the competitor's manpower and is unable to run multiple lines in parallel. As a result, Tesla still uses the Model 3 released 8 years ago and the Model Y released 6 years ago.

Like employees who were laid off during production hell in 2018, recently departed executives and laid-off employees are also paying for Musk's aggressive decisions.

Musk is also under tremendous pressure. Tesla was once questioned and on the verge of bankruptcy, and he also fell into depression. But as long as the crisis is finally resolved, Musk will reap the greatest rewards, and his wealth and fame will expand time and time again. He became the richest man in the world in 2021, appearing on the cover of Time magazine.

In the process of resolving crises time and time again, Musk constantly challenged authority, gave general directions or goals, and allowed engineers and suppliers to solve a large number of details. But that doesn't prevent him from proudly claiming that he is “probably the best person living on Earth who knows how to make.”

Modern technology companies have long established risk and reward mechanisms that encourage managers, especially founders, to risk growth. With the help of this mechanism, founders who are passionate about big adventures like Musk successfully ventured time and time again, and then placed bigger bets.

Now, the new ambition of this “person who knows the most about manufacturing” is to make the most advanced AI and intelligent driving systems, surpass the electric vehicle price war in one fell swoop, and defeat all rivals. As a result, he did not hesitate to suspend several long-invested manufacturing innovation projects, including the much-anticipated $25,000 next-generation affordable car. Tesla is embarking on a new all-in adventure.

edit/lambor