Tesla loses its 4680 battery exclusivity to China

One of Tesla's cylindrical 4680 battery suppliers has gone and signed a delivery contract with on the largest automakers in China.

Under the terms of the deal, Chery's premium electric vehicles will get 8 GWh worth of cylindrical batteries from LG Energy, putting an end to Tesla's 46-series battery exclusivity.

When Elon Musk announced the 4680 cells during Battery Day way back in 2020, he touted its potential to be twice cheaper amidst a drastic increase in capacity. Fast-forward five years, and only now has Tesla begun to make good on some parts of that promise.

The 4680 battery turned out a tough nut to crack, with the head of the world's largest battery company CATL warning Musk that he is wasting his time with the concept. So much so, that Musk cautioned Tesla might have to give up on the 4680 battery idea if it can't bring its costs down on par with its other suppliers like Panasonic or LG.

The first 4680 battery generation that Tesla made and installed in some Model Y batches was riddled with issues. It had lower energy density and worse charging curve than the batteries from its suppliers, while the expected manufacturing cost savings didn't pan out.

Tesla was only able to deliver about half of the promised cost reductions and that was the easy part that came from simply packaging more capacity in larger cells that could also then serve as a chassis structure directly, with the respective hit to vehicle repairability.

The 4680 battery was then resurrected for the Cybertruck in a second generation called the Cybercell which brought 15% higher energy density and some more production cost savings, but the same slow charging.

After the Cybertruck launch, Tesla optimized some of the charging curve and introduced the dry-cathode production method that is the real 4680 battery cell cost-saver. Elon Musk now claims that Tesla managed to achieve parity with the cells produced by its suppliers, and has made the 4680 battery the cheapest per kWh.

The caveat is that it is not clear if those cost savings are calculated with the US government's generous battery factory subsidies in mind, as they are only paid for local production, and may soon be scrapped by the Trump administration.

In any case, LG also has a dry-cathode production method in store for its 46-series batteries and has now signed a contract to deliver them to the largest Chinese car exporter.

LG claims that its cylindrical batteries that are going to China are superior in terms of energy density, cold weather performance, and charging curve. That remains to be tested as Chery will only start installing them in its premium EVs from early 2026 in a $730 million deal that will span over six years and can be extended to more models from the brand.