Elon Musk Says Tesla, Suppliers Put Together Aren't Enough To Fulfill EV Maker's Battery Needs

Tesla Inc TSLA CEO Elon Musk on Monday dashed hopes surrounding the automaker’s ability to reach self-sufficiency in batteries until at least 2022.

What Happened: Musk said on Twitter that the unveil at the event scheduled for Tuesday would affect long-term production especially of Semi, Cybertruck, and Roadster but “what we announce will not reach serious high-volume production until 2022.”

The billionaire entrepreneur added that the automaker didn't intend to phase out battery cell purchases from suppliers like Panasonic Corp PCRFY, LG Chem Ltd LGCLF, or CATL, as has been widely speculated.

Instead, Musk estimates that even if the suppliers go at "maximum speed," Tesla would continue to see "significant shortages" in 2022 and the years ahead unless the electric vehicle maker takes initiatives to produce battery cells on its own.

Why It Matters: Analysts expect improvement in battery technology or a doubling-down on relationships with existing battery suppliers at the battery day. 

BofA Securities analyst John Murphy theorized that Tesla has economies of scale and could even supply its batteries to others.

Leaked photos of the automaker’s latest battery cells show a large diameter, which could increase the volume and capacity of the cells. These new batteries are expected to be easier and less costly to produce.

This month, Panasonic said it was expanding its battery manufacturing capacity at Tesla’s Nevada Gigafactory by 10%. 

Another battery partner, Korea’s LG Chem expects to double its revenue from $25.3 billion by 2025 as it benefits from sales of Model 3 vehicles in China.

Price Action: Tesla shares traded nearly 5.9% lower in the after-hours session at $423.04 on Tuesday and closed 1.64% lower at 449.39.