Tesla's Consecutive Production Cuts Early This Year... Will Next Year's Cylindrical Battery Also Shrink?

Shanghai Factory Lunar New Year Production Halt
Large-Scale Investment Burdens Domestic Companies

[Asia Economy Reporter Jeong Dong-hoon] Tesla, the world's largest electric vehicle company, has decided to halt factory operations for a significant period from the end of this year until the Lunar New Year next year, raising concerns about a bleak outlook for the cylindrical battery market in which domestic companies have invested heavily.

Tesla announced on the 29th that it will suspend operations at its Shanghai factory, which accounts for about half of its total electric vehicle production, from December 24th this year to January 1st next year, and will also halt production from January 20th to 1st due to Lunar New Year holidays. Last year, Tesla did not provide a separate Lunar New Year holiday apart from the three-day Lunar New Year break.

Industry insiders expect the Shanghai factory's production to decrease by about 20,000 units in December and 35,000 units in January. Considering Tesla sold 1.05 million electric vehicles last year, this preemptively confirms an annual production cut of approximately 5.2%.

Just six months ago, Tesla was in such high demand that it was said to be "sold out." Used car prices were even higher than new cars, reflecting strong sales. A production cut was unthinkable even in dreams. However, the global economic slowdown is significantly impacting electric vehicle demand. In fact, China Merchants Bank International (CMBI) reported that Tesla's average daily electric vehicle sales in China from the 1st to the 25th of this month decreased by 28% compared to the same period last year.

Cylindrical battery. The photo is not directly related to the article.
[Image source=Yonhap News]

Tesla's demand slump signals a crisis for the cylindrical battery market, where LG Energy Solution and Samsung SDI have entered. Unlike other automakers that use prismatic and pouch-type batteries, Tesla uses cylindrical batteries in its main models. Following Tesla, BMW and Lucid also incorporate cylindrical batteries in their products, but most cylindrical batteries are supplied to Tesla. Tesla's downturn inevitably negatively affects the future of the cylindrical battery market.

Cylindrical batteries are a traditional battery form widely used even in households. Compared to prismatic and pouch-type batteries designed for electric vehicles, cylindrical batteries have lower energy density but offer the advantage of fitting more cells into the same battery pack area. Another advantage is the existence of standard sizes. Standardized sizes such as 4680 (46mm diameter, 80mm length) and 2170 (21mm diameter, 70mm length) allow manufacturers to focus solely on production efficiency. As a result, the industry expects the market share of cylindrical batteries by battery type to rise from 19% this year to over 26% by 2030.

The decline in demand for cylindrical batteries is unwelcome news for domestic companies that have announced large-scale investments. LG Energy Solution has designated its Ochang plant in Chungbuk as the "mother factory" for cylindrical batteries worldwide and plans to invest a total of 4 trillion won by 2026 in new and expanded production lines. A mother factory is a plant responsible for validating new models and improving production efficiency to disseminate to overseas production subsidiaries. Samsung SDI is also constructing a second cylindrical battery plant in Seremban, Malaysia, with an investment of 1.7 trillion won.

Professor Park Cheol-wan of the Automotive Department at Seojeong University said, "Cylindrical batteries are a battery form factor that can continue to grow, but short-term performance losses seem unavoidable." He explained, "There are concerns about performance losses for LG Energy Solution and its partner companies supplying cylindrical batteries to the Shanghai factory."

This content was produced with the assistance of AI translation services.