I'm Shunichi Watanabe, the CTO of Panasonic Energy. Let us start with my story. [Foreign language] Firstly, Panasonic Energy started as an independent company from last April 1. Our sales composition in Panasonic Holdings is about 10%. Individually, Panasonic Energy has experience in battery production for about 90 years. Even in such a thing, the automotive field is over 50%, about 61% is the current status. This page is indicating Panasonic Energy's mission, vision, and will.
Our vision is energy that changes the future. You can see that this 2D barcode is that you can see our few minutes video, it's more easy to understand. [Foreign language] Today's my story is the technological strategy is three key points. The first one is a higher energy density.
Second one is less rare metals. Third one is less response to the environment. This third thing is, I will explain in detail. This figure indicated to our, so the growth and technology is improvement historically. Our, so the energy density in the cylindrical battery is gradually, and we started as a at 1994, started with lithium-ion battery. You can see the gradually improved the energy density. At this time, we have already achieved three times higher energy density versus the first generation.
This figure indicated the several pictures is meaning to that, so that this big advantage and technology introduced in the firstly in the globally is, so that meaning to our Panasonic Energy is always the technology leader in our histories. Next target we will achieve to the 20% more energy density increase for the 2030.
That's also basic, so the improvement strategy for our technology improvement. Additionally, we contributed to how to reduce the rare metals, especially in the cobalt. First time, cobalt content in the cathode material is 100%, but we gradually introduced the advanced cathode material. In this time, we have already achieved the cobalt percent is less than 5%. This is meaning to compare the other competitors, it might be over 10%. In this time, we have half of the advantage in this time.
The future is we have already developed the cobalt-free technology. Also, we are trying to reduce the nickel content, keeping our capacity. That's a big challenge for the technology for the battery fields.
I'd like to in detail to the cathode material compared with the cobalt-free other technologies. The vertical and the horizontal axis indicated the cobalt content. Many party try to the cobalt-free technology, but these kind of the capacity is less than half capacity compared with our technology. In the future, we will achieve the cobalt-free and the lower nickel, so that even need a higher capacity.
That's a totally different technology level. That's also basically the competitiveness of the Panasonic Energy strategy. Another thing is our competitiveness is manufacturing. Our strength is basically high speed and high quality process. In these days, our production rate is cylindrical cells is one day is 7 million.
It's meaning to the 80 cell per second. It's a so fast production systems. The product safety management is achieved to the even in the 10 billion cell is no the automotive battery field is a zero recall. Established to the trust traceability systems is keeping to our technology in the future. In our production line is a very small picture in this figures. That's over 50% equipment is also our in-house design and in-house manufacturing. It's also keeping to the key technology to how contribute to the safety level of our product.
Another approach or we are trying to reduce the carbon footprint of our products. We have already disclose this the ratio of our production and our material supply chain. The ratio is this figure indicated.
We try to reduce our production carbon footprint and we will achieve carbon neutral in 2029. Also, the share is just only 14%. If we want to reduce 50% of the carbon footprint, we need to reduce our total supply chain as needed. We have already disclosed and we started collaboration with our suppliers. Two examples that I was shown are, one thing is the usage of recycled material in North America. We have signed the procurement agreement with Redwood. Redwood has a big factory in close proximity to our Nevada factory.
We will introduce the recycled cathode material and copper foil. The second one is we have signed the MOU for the Novonix graphite.
It's the Canadian company and their production is introducing the hydraulic power process. It's becoming about one fourth carbon footprint we've achieved. This kind of approach is our supply chain introducing to the lower carbon footprint material. It's leading to our for the green product.
Finally, we are trying to 4680 cells to the next generation. It's meaning the bigger cell is approximately five cell capacity. It's just one cell. It's becoming easier to reduce the human resources about 30-50% we can reduce our production line. Of course, this large cell can reduce the number of the welding point in the battery pack. This kind of approach will reduce basically to the EV format.
We are trying to do the manufacturing. Finally, our contribution to the carbon reduction shield to direction reductions. We are planning to introducing to the mainly in North America is 3 or 4x larger. It meaning to becoming to the reduction carbon dioxide emission is will decrease. The amount is in the right side of the figure that we can easily do the estimate is that if we production that thing is 60 million tons of the carbon dioxide is will reduce. It's our challenge for the for the our green impact. That's the total of my story. Please, the some Q&A sessions.
A quick question from Michael. Please ask a question.
Hi, Watanabe-san. This is Michael Medeiros from Kodai Capital. Thank you so much for hosting the meeting today. I had a couple of two questions. To begin with, I wanted to follow up about the 4680 battery cells. We saw at CES last month in Las Vegas that Panasonic and your booth demonstrated that you already have ability to produce on a pilot basis 4680 cells. I wanted to understand what is the roadmap for Panasonic's mass production of 4680 cells? What do you see as the remaining hurdles to commercialize these cells for Panasonic?
[Foreign language]
Thank you very much, Michael, for that question. To your question about 4680, we have pretty much done all the validation on the technology front. We are quite confident that the 4680 will perform from an engineering technology perspective. The only remaining question is mass production. We are actually already running a pilot program for mass production in Japan domestically so that we can validate the mass production ability of that technology.
On top of that, what is required is more than simply being able to mass produce because it is going to require a lot of investment for us. Making sure that we have very good productivity when we have mass production is going to be quite important too. We are trying to rationalize and streamline the mass production process.
As a matter of fact, we are about to start mass production pilot project at our Wakayama factory in Japan. All the retrofitting is almost done. The machineries, the devices are about to be installed within the factory so that we can start mass production validation. We are planning to spend the entire fiscal year ending March 2024 for the mass production validation at Wakayama factory. We'll be starting off with the small volume first to make sure that we have a nice ramp up for mass production.
In relation to this discussion, we have made an announcement about the new plant in Kansas. We mentioned briefly about the potentially producing 4680 in Kansas factory too. Like I said, we'll be validating mass production for 4680 for the entire fiscal year. It will take about full one year for validation.
Therefore, rather than starting 4680 with Kansas right away, we will focus on producing 2170 in Kansas factory because 2170 has a lot of demands. A lot of customers actually want that product as soon as possible, as much as possible. We will focus on Kansas particularly producing 2170 while running the Wakayama factory validation process. Once we are confident about the mass production producibility of 4680, we will start producing 4680 in North America too. Hope that answered your question.
Very clear. Thank you so much for the detailed response. If I could ask one more question in terms of the margin structure of the battery business. We know that in the current fiscal year, Panasonic Energy has set a margin target of about 4% operating margins, whereas the Korean competitors currently are generating about 10%, if not slightly higher than 10% margins in their cylindrical battery businesses. From a technology perspective, where do you see opportunities to improve the margins of your battery cells? What do you see as the logical margin target over the long term? Thank you so much.
[Foreign language]
Thank you very much for that question. I would like to answer that question with two different answers, meaning same answer, but two different topics. One is about the material cost, like a cost for BOM, let's say. The other component of the cost is the fixed cost. Let me start off with the material cost or BOM cost. The cost in this battery industry is generally being presented with dollar per KWh . That means if the technology or our product's energy capacity, energy density, and capacity goes up, cost competitiveness will also go up.
Like we were just discussing in slides earlier, we are now, the technology is improving. Once the technology improves, the capacity, the energy densities are going to go up as the slide and the presentation presented. That means cost competitiveness will also go up.
That means cost per fixed cost investment that we have to make. The cost divided by fixed cost will also improve. That is one of the directions in which we are aiming to improve our margin structure. The other part of your question goes to fixed cost, right? Before Kansas factory, we had many experiences in Nevada factory. We have actually rolled out close to, if not more than, 500 initiatives for Kaizen cost improvements. We will take all those improvement points and then bring that to our Kansas project.
Just to give you a rough idea, we are talking about 20% in headcount reduction. That is what we are targeting at right now. Those different initiatives that were learnings will be adopted to Kansas project so that we can minimize both capital investment required as well as fixed operating cost.
Thank you very much. I have a follow-up question.
[Foreign language]
Yes, there was a clarification question about this. 20% reduction about fixed cost. That 20% is specifically talking about reduction in headcounts. That part of the fixed cost.
While we wait questions, I have another follow-up question.
[Foreign language]
While we are waiting for other audience members to be asking questions, we also have an additional follow-up question. This question is about, again, 4680. When we talk about that particular technology, Panasonic will leverage, of course, what the experiences Panasonic have developed with the experiences of making mass producing 2170. On the other hand, we see some leadership coming from Tesla. On the other hand, LG Energy Solution also have discussion about their product.
We want to better understand competitiveness, the advantage that Panasonic demonstrate against all those dynamic competitions happening in the marketplace. Now, to that question, not a lot of information has been around for competitors' technology. It is very difficult to say a direct comparison about advantages of our technology versus others.
Having said that, the 4680 requires a very complex technology, simply said, because it's five times bigger in terms of capacity or density. Basically, you have to rotate that cathode anode. If you stretch it all the way and unroll it and stretch it, the length is about 4 meters. Processing, manufacturing process is very delicate. It's not really an easy process to do. You have to have a very good performance in terms of chargeability from that material. There were a lot of different delicate controlling points that you have to be very careful about. That particular design of those critical technologies are all our internal capabilities.
We will be doing everything from designing and production for critical points. Every critical point will be covered internally. That means we are very confident about high quality of our product from the very beginning.
4680 is a much bigger cell, physically speaking. That requires a lot more attention to safety, which will be a very big differentiating point. Safety is going to be. I cannot share the details of our technology here, but we have developed a lot of safety-related experiences with the cylindrical battery technologies. Managing with the high density, high capacity with the utmost safety is also, again, not an easy feat. Although we cannot directly compare, we are very confident our safety level also will bring a lot of confidence and reliability things to our customers. That is also, we believe, is going to be a big differentiating point.
Thank you very much. Now, we'd like to take a question from Funato-san. Funato-san, please unmute your line and ask your question.
Hi, thank you. I was just wondering what are some of the issues that you face when going into mass production from the pilot line? Because I understand it's not as easy as just copy and pasting the lines and some of the relationship issues with Tesla in the past have surfaced because of, I think, slowness or difficulties in ramping up production. Going into this new 4680 batteries, I was just wondering, yeah, what some of the difficulties you guys think you may face are.
[Foreign language]
Thank you very much for that question. What we are validating in the pilot project is basically different steps required for mass production, right? Each step will have a target takt time. There were multiple steps in validation. The very first, early stage is focusing on just a single step at a time, making sure we are delivering that particular step within the target takt time with good quality. We will also do inspection rounds to make sure that step is delivered not only within time, but also with good quality.
The following step will be to bring those different steps into the mass production line with material transfer, with the inspection process all being adopted. Once again, those will be required as a part of the validation process for mass production.
Now, like we were discussing, this 4680 requires very long stretching material, four meters. How can you manage that in the manufacturing process? While also you have to make sure that you have to place the separation wall without any problem. These are the two specific technological challenges that one would assume in mass production. By the way, we are delivering those two particular manufacturing steps within target takt time with good quality.
Now we are taking that design and introducing that to Wakayama factory for mass production. That is one. The other thing is that this product is going to be very heavy. That requires careful attention in designing how to move the product around or the half product around with the good delivery system, with the good consideration about the timing of delivery. That is also being validated.
We are quite successful on all those points in Wakayama factory so far.
I see. That's very clear. Thank you. Okay, that's it from my side for now. Thank you.
[Foreign language]
Yep. While we wait, Christian, I have one other question.
[Foreign language]
While we are waiting for others to ask questions, we have one more question we wanted to ask him, which is about what are the important targets or specific KPIs that the CTO wants to focus on looking at the battery industry. He wanted to thank him very much for asking that very tough question. We have more than 25 years of experiences in producing lithium-ion batteries. We always have this vision to make sure our battery technology will cause big transformational contribution, just like EV has been.
One of the things that we learned through the course of the history is rare metal, access to rare metal can be a significant bottleneck. You can easily imagine once the scale of this industry goes up, that will be a huge bottleneck or problem.
That's why we have been deliberately taking risks to become less dependent on rare metal. We are proud and confident that we are technology leaders in that sense in making sure that we don't have to rely on rare metal as much as possible. It is going to be the same for the future too, right? Because for industry to flourish, for this industry to become very big, we have to keep reducing reliance on rare metal.
Therefore, less usage of rare metal or less rare metal would be one of the critical KPIs. The other thing is have more recycled materials so that we can reduce carbon footprint. That is one. The other important KPI is now thinking back at the lithium-ion batteries history of how the prices of that technology have evolved. The price has dramatically come down. That is due to the fact of mass production.
Volume also helped, but it's not only about that, right? Technology actually made many different contributions in bringing the cost down. We believe that EVs should be accessible as cheap as internal combustion engine vehicles. That requires a higher energy density because that will have a direct impact on reducing BOM. We believe improving performance of battery is directly correlated with the cost for the battery. That's another key focus point that we'll be having moving forward too.
The other thing is as the volumes go up, local production and local consumption becomes also very important to sustain massive demands. Local production, local consumption, that would be another important KPI. I think we mentioned about three important KPIs, and those are the three directional important critical focuses that we'll make sure that team will deliver.
Thank you very much. Now, I would like to take a question from Kohata-san. Kohata-san, please unmute the line and ask a question.
[Foreign language]
Kohata-san was asking a question about recycled and reuse because we are expecting numbers of electric vehicles to go up, volume of batteries around the marketplaces are going up, batteries come with a certain lifetime, right? It's not going to last forever. Therefore, how to take care of the battery after selling it to the marketplace, how to use them, how to recycle them, reuse them, those will be very important, we believe, he believes. Therefore we would like to ask Panasonic's perspective about reuse and recycle of used batteries.
The response to that question is we also are very aware that battery can be a significant issue after being used by EV if not done anything. We also are aware there are a lot of initiative projects going on within the society that try to mitigate that problem.
We also believe not everything has to be recycled after being used by electric vehicles. Use them for other purposes and make sure the performances of batteries are completely exhausted before we put into recycle process. It would be better for the earth. The carbon footprint will be in total reduced if we can have a good reuse processes. One of the important questions about reuse would be how the batteries are being used because the different ways of using batteries can extend or shorten the life of the battery.
Therefore, Panasonic Holdings has one measurement that is giving us the health of battery. We call it SOH or state of health. That is basically knowing the state of the health of the battery. We can monitor them.
We can also predict how the battery is going to be performed by running this diagnostic process and therefore improve the overall lifetime value or the lifetime contribution of a single battery. If the battery needs to be delivered for different purposes, we can probably, by knowing the state of health, make recommendations to the user in terms of bringing battery or bringing that battery to place A instead of place B to make sure that battery does not deteriorate otherwise.
Having access to that kind of diagnostic data with the history of how that battery will be used before can also enable us to quantify the value of the battery as an asset. If we can quantify that, that will be very helpful in selling that used battery in the completely different applications for the second-hand market.
That will be one of the things that we are engaged with. The other thing is the recycling process. As we discussed earlier in slides, we have a very deep partnership with a company called Redwood. This company was founded by J.B. Straubel, former Tesla guy, and he actually has a factory five minutes away, like driving from our Nevada factory.
Entire scrapped batteries, 100% of our scrapped batteries are transported to their factory and being processed so that that scrap battery can be reborn as a completely new battery. Battery to battery recycling process is almost established. It is quite very close to being finalized as a process. That will be another work that we are currently working on in terms of recycling and reuse.
[Foreign language]
Thank you very much. It's already
[Foreign language]
Sorry. The first one, yeah, please ask your question. Just one question. Last question, please.
Hi, sorry. Can you hear me?
Yeah.
Okay. Yeah, I think the equity markets want to see an expansion of your customer base away from Tesla. I know your management has commented in the past that you have interest from startups, but I was just wondering if there are any hurdles preventing you from gaining new other customers such as supply chain capacity or cost.
[Foreign language]
Thank you very much for that question. Generally speaking, as we have also made announcements about Lucid, we initially just started off with Tesla as a single customer, but we've been pretty clear about, yes, we are now excited about opportunities for expanding for multiple customer bases. In the end, we tend to prefer to work with customers who want to use cylinder technology, who have somewhat deeper understanding about how to manage cylindrical battery.
Those customers tend to be the choice of ours in terms of who we are going to be working with, with our customers as a result for the time being. Now, to your point about supply chain, supply chain needs to be improved anyhow, irrespective of the different format of the product because the industry is going to grow massively. That requires supply chain needs to be managed very efficiently.
That would be a very important mission for us, irrespective of cylindrical or other format, right? Generally speaking, supply chain, yes, needs to be improved. Another thing is we have many years of experiences. Even if the cylindrical shape and the size may not have changed over many years, we actually have four generations of that technology. All of the generation comes with the improvement in performances. We are expecting that to be happening for moving forward too. In any case, we tend to choose customers who have a good match, who have a better understanding about cylindrical battery technology so far.
[Foreign language]
Thank you very much, Kohata-san. We are nearly close to the end. We'd like to have a last comment from Watanabe-san.
[Foreign language]
Thank you very much for giving a chance for the discussions. One thing, some question for how calculate to our carbon deduction. It is that we calculate how much they use to the ICE vehicle to EV. It's a one car, how much we can calculate. The average distance in the 10 years, it's basically estimation how much 10 years running in the EV versus the ICE, either we can calculate under how much the supply to the car OEM that we can estimate to the total carbon reduction estimation.
That's the answer for the questions. One thing I'd like to say is that we have already, Panasonic have already experience in the lithium-ion battery production in USA. It's a five-year experience. It's a big advantage, I believe. Some kinds of the difficulties existed in the USA production.
We have already revised our production design totally in Kansas. It's our unique point. Another thing is our cylindrical battery is continuously improved. Even after the depreciation, we can improve the value of our product. It's a very unique point of the cylindrical cell business. That is why we will continuously improve competitiveness in the future. That is sort of totally what I would like to say. Thank you so much for giving the time.
[Foreign language]
[Foreign language]
Thank you very much, Watanabe-san. Thank you very much, everyone, to participate in the call. Please remember that I will ask you feedback. Thank you very much. [Foreign language] This is the end of the call. Thank you very much.