May 7 2014, 6:26pm CDT | by Forbes
Tesla Motors is moving fast with its plan to build what it calls a “gigafactory” for building battery cells and packs for its cars. The company plans to break ground on one “probably next month” and the second one a month or two after, said its CEO, Elon Musk, on Wednesday.
The company has yet to announce where it plans to kickstart two construction projects. But it’s working on both essentially at the same time in order to make sure that at least one of them will be ready to produce enough battery packs as Tesla boosts production of Model S that is available now and Model X, an SUV that it plans to launch in 2015.
Tesla’s plan to build a battery manufacturing center (or two) caught a lot of attention when Musk first discussed it publicly last November. Not only did it reflect the upstart carmaker’s struggle to manage its supply of components and figuring out an efficient way to produce its cars.
Tesla, founded in 2003, has shown to be able to design beautiful vehicles that — partly because they are all electric — really catch the public’s fancy. But can it become a long-running, profitable car manufacturer remains a big question.
The dual-location approach prompted one analyst during the earnings call on Tuesday to question whether the company is spending too much money.
The answer from Tesla executives, as you might expect, is “no,” considering that a shortfall in the lithium-ion battery cell supply was the biggest obstacle that prevented the electric car maker from marketing its cars as aggressively as it would’ve liked last year.
That shortage prompted the California company to create plans for building its own manufacturing complex for batteries, Musk said last November.
“For us it’s critical to have the first gigafactory ready on time,” said Deepak Ahuja, Tesla’s chief financial officer, during the earnings call. “Every month of delay is far more expensive for us than the incremental cost upfront to kickoff two sites at one time.”
Tesla wouldn’t be producing its own cells in the gigafactory, though. That job will likely go to Panasonic, which has been Tesla’s cell supplier and has signed a letter of intent to work with Tesla on producing cells in the new factory. There will be other companies onsite for producing components for the cells, too. Tesla will then assemble the cells into packs.
The first gigafactory should begin rolling out cells and backs in 2017. The production volume will increase overtime until it reaches an annual production of 35 gigawatt-hours for cells and 50 gigawatt-hours for battery packs. That gap will be filled by cells shipped from either Panasonic’s own factories or other cell makers, Musk said.
Tesla also has chatted up mining companies that supply critical components, such as nickel and cobalt, to try to ensure that it won’t face a shortage of materials.
The company initially had narrowed down its choice of factory locations to four states: Arizona, New Mexico, Nevada and Texas. It then whittled that list down to two states that it has yet to disclose.
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