If the Tesla Model 3 is going to be sold at a price that will make everyone smile, the Tesla Gigafactory and the economies of scale will make it happen.
It hasn’t, or they haven’t, been built yet, but the Tesla Gigafactory (-ies?) are the next key to Tesla Motors’ success as an automaker and business. Really, it’s not success we’re worried about, since Tesla is one of the world’s most valuable companies today, worth just shy of $30 billion and continuing to grow. The Tesla Model S can’t be built fast enough, and the Tesla Model X will likely be the same when it is finally released. The third wholly-Tesla vehicle, the Tesla Model 3, takes that success and expands it for a much wider audience, which you could say has less to do with success than it does with Elon Musk’s vision for an emissions-free transportation future. Come to think of it, perhaps that should be the true measure of success, shouldn’t it?
By increasing lithium-ion battery manufacturing well beyond anything available today, the Tesla Gigafactory should help to bring battery prices down to more manageable levels. For years, Tesla Motors has been sourcing its lithium-ion cells from Panasonic, incurring transport emissions and trade tariffs, increasing the cost of the battery pack and, by extension, the vehicle. For the Tesla Model 3 to be a success, however, battery pack prices will have to come down substantially, to make them affordable and profitable, which simply increasing the order from Panasonic won’t accomplish. Of course, the $5 billion-plus Tesla Gigafactory won’t get built on dreams and visions alone, so partnerships will be formed.
Panasonic, having signed an agreement with Tesla Motors yesterday, July 31, 2014, becomes the first partner in the Tesla Gigafactory, which is expected to be the biggest of its kind in the world. The Gigafactory, set for full production by 2020, will cover about ten million square feet and employ some 6,500. With this new agreement, about half of that space will be occupied by Panasonic lithium-ion cell assembly, and the other half will be occupied by Tesla. Electric vehicle battery packs won’t be the only thing coming out of Tesla’s half of the complex, however, but also includes residential and commercial battery backup for peak power and renewable energy backup. All told, the Tesla Gigafactory, at full production, is expected to produce over 80 GWh of lithium-ion battery packs per year.
Photo credit: jurvetson