Elon Musk Sees Battery Production Snags Next Year: Here's How He Thinks Tesla's Scaling-Up Plans Will Be Hit

Tesla Inc TSLA CEO Elon Musk said on Tuesday he sees challenges with battery production next year that can hold back scaling up plans for the electric vehicle maker over the next two to three years.

What Happened: Musk told workers at Tesla’s Giga Berlin, after handing over the first Model Y deliveries to customers, that the EV maker is being held back by numerous challenges and is facing a “high class” problem of orders outpacing production.

The billionaire entrepreneur said Tesla faced chip headwinds last year and continues to see some shortages this year as well. In the coming years, he said the challenges would be linked to battery production and its supply chain, which includes sourcing raw materials.

“Last year, there were a lot of supply chain challenges with chips…and then this year, there are still some chip shortages and then next year will be I think probably a challenge with total battery production,” Musk said.

Musk said that in the coming two to three years, the concerns would be the number of gigawatt-hours of battery produced, the supply chain, and the rate at which battery materials are being mined and refined.

At some point, the focus would be on how many terawatt hours of batteries can Tesla produce per year.

“Our rough calculation is that about 300 terawatt-hours are needed to transition the world to a sustainable energy economy. This is basically a lot of batteries," Musk said.

The world’s richest man later said that it’s aggressive but not impossible for Tesla to deliver “20 million cars in 10 years.”

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Why It Matters: Musk has previously said Tesla does not have a demand problem but it faces “very much production ramp problem.” 

Austin, Texas-based Tesla’s latest manufacturing site is however key to its plans to significantly ramp up production and sell an estimated million and a half vehicles this year. 

Giga Berlin is also expected to establish a stronger foothold in Europe and lower reliance on the Giga Shanghai plant. 

Price Action: Tesla stock closed 7.9% higher at $993.9 a share on Tuesday.