Battle for Cylindrical Battery Supremacy: The Mass Production Era is Upon Us

The era of mass production for large cylindrical batteries, which has been anticipated for four years, seems to be truly upon us. On September 15, Tesla announced the official rollout of its 100 millionth 4680 battery. Tesla CEO Elon Musk also congratulated the battery team. Just over three months prior (on June 6), Tesla had announced the rollout of its 50 millionth 4680 battery, marking a doubling of production in just over three months.

It is reported that Tesla has achieved large-scale production of 4680 batteries at its Texas Gigafactory and plans to further expand capacity by investing in the expansion of its Nevada Gigafactory for the production of electric trucks, the Semi, and 4680 batteries. The company aims to reach a battery capacity of 100 GWh and has even grander industrial ambitions, with future plans to increase 4680 battery production capacity to over 1 TWh and even 2-3 TWh in the long term.

A week earlier (on September 9), Panasonic Energy announced that it was ready for the mass production of 4680 cylindrical automotive batteries. Following renovations, its Wakayama factory will become the main production site for these batteries. Panasonic also held a launch ceremony to commemorate this milestone. After a final assessment, mass production will officially commence.

In China, EVE Energy has taken the lead in achieving mass production and delivery of large cylindrical batteries. As of June 18, 2024, the company had completed the delivery of 21,000 units, with 13,000 vehicles stably operating for over 1,000 kilometers, and the longest mileage reaching 83,000 kilometers. In the first half of 2024, EVE Energy also launched the large cylindrical Omnicell battery, featuring 6C fast charging capability, which enables a range of 300 kilometers in just 5 minutes, a 20% increase in range in low-temperature environments, and a 100% improvement in acceleration performance in low temperatures.

"A five-fold increase in single-cell energy, a 16% increase in driving range; in the future, with improvements in battery materials and automotive design, net driving range will increase by 56%, and production costs will decrease by 54%." These were the core data released by Tesla during its "Battery Day" in 2020 regarding the 4680 large cylindrical battery, shocking the industry.

In September 2022, BMW Group also announced that it would use 46-series large cylindrical batteries in its new-generation models starting from 2025 and has successively entered into supply agreements with domestic battery manufacturers EVE Energy, CATL, and Envision AESC for 46-series large cylindrical batteries, with a cumulative order volume exceeding 100 GWh. The clear demand for 46-series large cylindrical batteries from international automakers like Tesla and BMW has made them a new trend, with automakers such as Mercedes-Benz, General Motors, Porsche, and Volvo all announcing their future use or consideration of using large cylindrical batteries, aiming to gain the initiative in the design of their next-generation models and batteries.

EV batteries have always been the heart of EV, and Tesla's initiative with the 4680 battery is naturally seen as an opportunity for automakers to take control of their own destinies.

Clearly, this is likely to be a crucial "war" that will determine the new global landscape for power and energy storage batteries over the next decade. Over the past tumultuous decade, China's lithium battery industry has transformed from a follower to a leader, a testament to both its unyielding efforts and ceaseless innovation. In an era where technology reigns supreme, the most efficient business model is for each enterprise to concentrate all its efforts on a single point to achieve breakthroughs, ultimately collaborating to complete innovations across the entire industrial chain. This model is still being vigorously played out in today's semiconductor, chip, and new energy industries.

Throughout the history of battery development worldwide, the mature development and commercial application of each generation of battery technology have required decades of validation. Currently, the lithium battery industry is entering a new round of technological iteration, arriving at a critical historical juncture that will determine the new industrial landscape for the next decade.

Liu Jincheng, Chairman of EVE Energy, once publicly stated, "The dawn of large cylindrical batteries becoming the king of the industry has begun to emerge." Fan Wenguang, Vice President of Bak Battery, also expressed in April 2023 that "the mass production of large cylindrical batteries has entered the final stages before dawn."

Fan believes that as the optimal solution for mid-to-high-end EVs and the breakthrough point for electric vehicle penetration rates over the next 5-10 years, the market share of large cylindrical battery cells in China will exceed 30% by 2025, surpassing the global total demand in 2021. The "large" in large cylindrical batteries refers not only to their size but also to their ambitious steps, vast prospects, and significant challenges.

Based on various research reports from securities firms and relevant company announcements, it is estimated that the market demand for large cylindrical batteries will be between 144.2 GWh and 235 GWh in 2025. Among them, Huatai Securities analyzes that global installed capacity of large cylindrical batteries is expected to reach 429.0 GWh by 2027, corresponding to an overall market size of USD 29.39Billion.

Today, battery giants from both China and abroad, such as CATL, EVE Energy, Panasonic, LG Energy Solution, Samsung SDI, and Bak Battery, are actively entering the field of large cylindrical batteries and accelerating their industrialization process. According to incomplete statistics, more than 50 companies worldwide have laid out large cylindrical battery products and made capacity planning, with over 15 companies planning capacities at the GWh level. Among them, Tesla and EVE Energy have planned capacities of up to 210 GWh and 130 GWh, respectively, while CATL, Panasonic, Samsung SDI, Envision AESC, and Bak Battery have planned capacities exceeding 30 GWh and have identified clear target customers.

There is no doubt that the era of "large cylindrical batteries" has begun. Based on the analysis and judgment of industrial development trends, the key to winning this new technological war may lie in who can complete their industrial layout more quickly and efficiently.

Strategic Advantages and Market Space Analysis: Global Large Cylindrical Battery Installations Expected to Reach 429.0 GWh in 2027, with Market Size Exceeding USD 27.4 Billion

If classified by packaging form, lithium batteries can be divided into three types: prismatic, cylindrical, and pouch. From a technical perspective, each type of battery has its strengths and weaknesses.

In recent years, led by head battery companies such as CATL and BYD, prismatic batteries have consistently occupied a dominant position. According to GGII, in 2023, the shipment volumes of prismatic, cylindrical, and pouch batteries in China accounted for 93.6%, 3.4%, and 2.9% of the domestic EV battery market, respectively.

However, through technical and data analysis, large cylindrical batteries exhibit clear advantages in terms of economy, safety, and recycling value. For example, in terms of cost reduction, the increased size of 46-series battery cells reduces the number of required battery cells and welding accessories, improving battery pack assembly efficiency and simplifying BMS management. In terms of performance, the larger size results in a lower proportion of metal casing and a higher proportion of active cathode and anode materials, enhancing energy density. Additionally, the application of full tab technology shortens the electron path, reduces battery internal resistance, minimizes losses during charging and discharging, and enhances discharge efficiency.

It can be said that Tesla has single-handedly spearheaded the rise of "large cylindrical battery" technology and industrialization.

Looking back at the industrialization process of cylindrical batteries, it took nearly 17 years from the invention of the first commercial lithium battery, the 18650 cylindrical battery, by Sony in 1991 to the first large-scale application of cylindrical batteries in EVs.

Flashback to 2008, when Tesla's first luxury electric sports car, the Roadster, was officially launched. It was equipped with nearly 7,000 cylindrical batteries produced by Panasonic, pioneering the use of cylindrical batteries in EVs.

Since then, Tesla and Panasonic have continuously pushed forward the industrialization of large cylindrical batteries. By 2017, Tesla had jointly launched the 21700 cylindrical battery with Panasonic, which was used in the Model 3. This battery adopts an NCA cathode material with a small amount of silicon-doped anode, and its single-cell capacity is about 50% higher than that of the 18650 battery.

It was not until 2020 that Tesla officially unveiled the 4680 large cylindrical battery, an innovative product, during its "Battery Day." The 4680 battery is a new type of large cylindrical battery with a diameter of 46mm and a height of 80mms. In terms of single-cell energy, Tesla claims that the 4680 battery is five times that of the existing 2170 battery. According to Tesla, compared to the 2170 battery pack, the 4680 battery pack will increase vehicle driving range by 16%. In the future, with improvements in battery materials and automotive design, net driving range will increase by 56%, and production costs will decrease by 54%.

According to 36Kr, Tesla's dry electrode technology can not only be used in 4680 batteries but is also the ultimate production method for future solid-state batteries. This technology can shorten the entire production line by about 100 meters, close to the length of a football field. An industry insider told 36Kr that using dry manufacturing for both the cathode and anode can save 2-3 cents per watt-hour of battery cell price.

What does this mean? according to ICCSINO Latest price, the current lowest quoted price for prismatic LFP battery cells is RMB 0.32/Wh (USD 4.4c/Wh), with BOM costs, manufacturing, labor, and other expenses totaling RMB 0.28-0.30/Wh(USD 3.84c-4.1c/Wh). The savings achieved by Tesla are already equivalent to the profits of most second-tier battery manufacturers.

Obviously, once mass production of this product is achieved, it will provide Tesla with significant technological and cost advantages.

Further analysis of the data reveals that the 4680 large cylindrical battery is essentially an optimization of battery structure, capable of achieving high capacity and energy density while also possessing excellent heat dissipation and high integration. However, it poses higher requirements on material systems, production processes, and equipment. Compared to prismatic and pouch packaging, the upgraded large cylindrical battery exhibits clear advantages in the EV battery field, mainly in five aspects:

Firstly, in terms of safety, large cylindrical batteries are currently the safest among the mainstream battery types due to their uniform stress distribution, excellent heat dissipation performance, reduced number of battery cells, tab-less design that lowers battery thermal management difficulty, and technologies such as pressure relief valves and integrated structural components that enhance battery pack structural strength.

Secondly, in terms of cost-effectiveness, large cylindrical batteries have certain cost advantages due to their simple process, high standardization, reduced structural components at the pack level, and simple assembly.

Thirdly, in terms of driving range, the high safety limit of large cylindrical batteries allows them to support more aggressive and higher-energy-density chemical systems such as high-nickel ternary and silicon-based anodes. According to Tesla, compared to the 21700 battery, the 4680 battery offers a five-fold increase in single-cell capacity and a 16% increase in driving range.

Fourthly, in terms of service life, although ternary battery cells have relatively fewer charge-discharge cycles, their high energy density, energy throughput, and calendar life do not place them at a disadvantage in terms of service life.

Finally, in terms of fast charging, the adoption of tab-less technology shortens the distance electrons travel within the battery, significantly improving charging speed. Industry insiders analyze that based on the high safety of large cylindrical batteries, they become the best carrier for balancing high energy density and super-fast charging. Large cylindrical batteries can further enhance fast charging performance while ensuring safety and sufficient driving range, helping EVs offer a user experience comparable to that of ICE vehicles.

According to our research, large cylindrical batteries exhibit significant advantages in the electric vehicle field and are expected to become the optimal solution for mid-to-high-end EVs. In fact, in recent years, many new entrants to the EV battery industry have primarily focused on mass-market products, continuously increasing capacity, leading to homogenized competition and overcapacity in the low-end market. In contrast, there is a trend of "supply failing to meet demand" for mid-to-high-end batteries.

Currently, in addition to Tesla, automakers such as BMW, Mercedes-Benz, General Motors, Porsche, and Volvo have also announced their future use or consideration of using large cylindrical batteries, all aiming to gain the initiative in the design of their next-generation models and batteries.

Among them, BMW Group is another automaker that has clearly identified large cylindrical batteries as the main technical direction for the future, intending to use them in the pure electric models of its new-generation (Neue Klasse) vehicle architecture. Previously, BMW's chosen technical route was prismatic batteries.

In the second half of 2022, BMW Group signed battery procurement contracts for large cylindrical batteries with CATL, EVE Energy, and Envision AESC. These 3 battery suppliers will establish battery factories in China, Europe, and North America, respectively, to supply BMW Group. The overall scale will reach 110 GWh, which, based on a pure electric vehicle battery capacity range of 60-90 kWh, can power over 1.1 million vehicles after reaching full production capacity.

Similar to Tesla, BMW Group's chosen large cylindrical batteries also have a diameter of 46 mms, but the battery heights are not 80 mms; instead, they adopt two options of 95mm and 120 mms.

Led by the two automotive giants, Tesla and BMW Group, it is nearly a consensus within the industry that "large cylindrical batteries are expected to become the mainstream technology of the future."

Furthermore, on January 28, 2023, TheElec reported that General Motors was considering using cylindrical batteries instead of pouch batteries in its EVs. Its future new electric vehicle platform will support the use of large cylindrical batteries similar to the 4680 specifications, but specific specifications have not yet been released.

In the China market, NIO is developing its own 46105 large cylindrical battery cells and packs for 900V systems. Each cell boasts an industry-leading energy density of 292 Wh/kg, and the entire pack has a capacity of 120 kWh, with a supercharging and battery swapping pack charging efficiency of 5C.

On the other hand, JAC Motors believes that high-nickel + silicon "46-series" cylindrical batteries not only offer high safety but also allow for vertical placement of battery cells, providing obvious advantages in vehicle design and space utilization. Currently, JAC Motors primarily adopts a collaborative R&D model for "46-series" cylindrical batteries and is already developing multiple large cylindrical battery cells, including the 4680, with some being sourced from external suppliers (such as CBAK Energy Technology).

In fact, in addition to the automotive field, large cylindrical batteries are also accelerating their penetration into the residential energy storage field. Currently, LFP batteries exhibit higher safety but lower energy density and cost, making them more suitable for energy storage applications. The residential energy storage market has different demands for capacity and portability, further increasing the requirements for flexible series-parallel connections of battery cells. LFP-based large cylindrical batteries, with their flexible packaging advantages, stand out in the residential energy storage market. Battery companies such as EVE Energy, Great Power Energy, Hichen Energy, CBAK Energy Technology, and Times New Energy have successively launched large cylindrical LFP batteries tailored for the residential energy storage market.

Currently, large cylindrical LFP batteries are highly favored by the residential energy storage market due to the upgrading of energy storage systems, which place higher demands on battery capacity, cost, power, and safety. Large cylindrical batteries, benefiting from tab-less technology, optimized manufacturing processes, and material systems, exhibit significant advantages in terms of single-cell capacity, cost, performance, cycling, and safety. For example, LFP materials inherently possess high safety, and large cylindrical batteries adopt high-strength steel casing designs, which exhibit small deformation under the influence of electrode group expansion, impact resistance, and high reliability. Combining market demand and technological iteration, the development trend of large cylindrical batteries is evident, and relevant companies are actively conducting R&D on large cylindrical energy storage batteries, striving to push the cycle life of large cylindrical batteries towards 5,000 cycles or even higher.

Based on various public information and relevant company announcements, it is estimated that global demand for large cylindrical batteries will reach 144.2 GWh to 235 GWh by 2025. Additionally, according to ICCSINO' predictions, global installed capacity of large cylindrical batteries is expected to reach 429.0 GWh by 2027, corresponding to an overall market size of USD29.4 billion, with a CAGR of 110.7% from 2023 to 2027.

Core Players and Capacity Layout: 50 Companies Deploy Large Cylindrical Batteries, with Over 15 Planning GWh-Scale Production.

To secure a leading position in the upcoming industrial battle, almost all EV battery giants, not just Tesla, are accelerating their strategic layouts in the field of large cylindrical batteries, setting the stage for an inevitable global competition.

Currently, Japanese and Korean companies dominate the global large cylindrical battery market. According to EVTank data, the combined market share of Panasonic, LG Energy Solution, and Samsung SDI in cylindrical batteries increased from 48.9% in 2021 to 59.7% in 2022, and further rose by 10.1% in 2023.

However, the real industrial war has just begun. Future adjustments in giants' attack strategies and the pace of strategic execution will significantly impact the industrial landscape. It's too early to predict winners and losers.

Over 50 companies worldwide have laid out large cylindrical battery products and capacity plans, with more than 15 planning capacities at the GWh level. According to statistics from the ICCSINO, based on company announcements and securities firm reports, 11 companies including Tesla, Panasonic, LG Energy Solution, Samsung SDI, CATL, EVE Energy, BAK Battery, Envision AESC, Lanjun New Energy, and NIO have planned over 700GWh of large cylindrical battery capacity.

Tesla is the fastest-moving and most aggressive expander overseas. In December 2022, Tesla announced on Twitter that its 4680 battery team produced 868,000 batteries in a week at the Fremont factory, equivalent to the batteries needed for 1,000 Model Y electric vehicles, with an annualized production capacity of about 4GWh. According to Tesla's 2022 earnings call in January 2023, Tesla will invest $3.6 billion to expand the Nevada factory for Semi truck and 4680 battery production, with a battery capacity plan of 100GWh.

LG Energy Solution is the most aggressive expander among overseas battery giants, planning 120GWh of large cylindrical battery capacity by 2025, followed by Panasonic with nearly 80GWh. Samsung SDI plans to start trial production of LFP and NMC batteries later this year, aiming to produce 4680 batteries for Tesla's Model Y, with a 2025 capacity plan of about 24GWh.

In China, EVE Energy is the deepest and most aggressive player in large cylindrical batteries, planning 200GWh by 2025, far exceeding CATL's 40GWh and BAK Battery's 30GWh.

While the future of large cylindrical batteries looks promising, the risk of overcapacity must be addressed, given giants' capacity plans and a market demand forecast of 235GWh in 2025 and 429GWh in 2027.

Challenges and Difficulties in Industrialization

The key to success may lie in the speed of industrialization. Large cylindrical batteries have undeniable technical advantages but face challenges in industrialization, particularly in process upgrades and improving yield rates. Currently, the yield rate bottleneck hinders mass production. Tesla's 4680 line initially had a 20% yield rate, improved to 80% in 2021, and reached 92% in early 2022, but still lags behind the 95%+ of 21700 batteries. EVE Energy's yield rate is around 90%, while some Chinese companies are still in the B-sample stage with yields around 50%.

Since Tesla unveiled the 4680 battery in 2020, its industrialization has faced setbacks. Mass production and full integration into Tesla's main models are not yet realistic. Dry electrode process challenges are the main obstacle. Traditional wet processes involve mixing powder materials with toxic solvents, while Tesla's dry process directly compacts powder onto foil without water, reducing costs and equipment investment. However, mixing powder uniformly and roller pressing are difficult steps, especially for the hard nickel-cobalt cathode.

Tesla is reportedly considering stopping 4680 production at Giga Texas due to unsatisfactory energy density, charging performance, and higher costs. As Tesla's key supplier, Panasonic's 4680 line in Wakayama, Japan, originally planned to start trial production in 2023 but has been delayed to 2024. LG Energy Solution and Samsung SDI have also invested in 4680 lines but have not announced clear mass production timelines.

EVE Energy, the fastest potential mass producer in China, has been showcasing its 4680 batteries and received orders from BMW. The company emphasizes that manufacturing, not R&D, is the key challenge for large cylindrical batteries, highlighting the importance of consistent product performance and scalable delivery.

All players are still on the journey from lab to mass production, which won't be smooth. Once technological constraints are overcome and yield rates improve, large cylindrical batteries could compete with prismatic batteries and even dominate with new technologies. However, the acceleration of semi-solid-state batteries poses a new challenge to their development.

Some believe semi-solid-state batteries will outperform large cylindrical ones in energy density and future potential (full solid-state), despite higher costs. Others argue that large cylindrical batteries, with steel casings, are safer than semi-solid-state's soft packs, especially for high-nickel ternary batteries.

Multiple battery technologies coexist, and companies' explorations to reduce user anxiety are valuable. The battery industry has entered a new technological iteration, and the next decade's landscape will be shaped by those who solve industry pain points and achieve mass production first.