Tesla Is Looking at California for a Battery Factory

Tesla Is Looking at California for a Battery Factory

From today's WSJ

This will come as a severe shock to amped realtor. It may not go to Surprise, AZ after all. What a, well, Surprise!

johncrab | 17. Juli 2014

Red tape is a big drawback in California. The permitting process is long, arduous and expensive. The bill signed last week should clear away some of that but Tesla always said they would start two facilities. I'm betting a two part process of making cells in Nevada, closer to the lithium and a battery pack construction and testing plant in California's Central Valley, both in a line that can be served by rail to get finished packs to Fremont.

As an Arizona native, I could say a few mean things about Surprise, but I won't. It's just illogical for any company to bring a huge factory to a state that won't allow the sale of its finished product. AZ and TX are out for that reason. They're just in that group for window dressing. My state is big on begging with one hand while wielding a club in the other and they wonder why things don't work out. Then again, those in power are not from here.

Gadfly | 17. Juli 2014

John, as a fellow Arizona native I agree with you 100%. Arizona doesn't stand a chance. I made your same points a month or so ago in a posting on the subject and of course got roasted by the AZ fanbois. I don't have your tact and made the comments you wanted to make about Surprise and the West side and really got roasted by an owner out there who "sells a lot of $1 million homes in Surprise.". There is a reason Tesla put the store and service center where they did and not over there.

The Journal article explains why Nevada and New Mexico are still in the running, and even suggests that Texas is as well. It doesn't even mention Arizona.

michael1800 | 17. Juli 2014

I believe Tesla will pick the most financially (direct and indirect) advantageous location, regardless of if they allow sales or not. Competition has turned out to be an awesome force. The beauty of breaking ground on two sites is that bait-and-switch is off the table and it intensifies the competitive forces in an unofficial round two. I'd say its still an open running provided AZ leans in a bit more. We'll see soon enough.

Brian H | 20. Juli 2014

Didn't Elon say 3 sites? I must be mis-recalling.

AlMc | 20. Juli 2014

In business it is best to have a short memory and as a stockholder (as many are on this forum) I want it that way. While I have no proof (and no one but a few top executives at TM does) I believe that there is a good chance of multiple site ground breaking at the same time. Eventually TM will need multiple factories so it makes sense to move with a couple at the early construction phases as well. Then, by the end of the year, decide on the one to bring on line forst based on how cooperative (or uncooperative) the locals are about the build. Going with multiple ground breakings also keeps the states in competition for the first 'on line' factory while pushing them for the greatest concessions.

I feel the three that have the best chances: Nevada, Texas and California.

It will come down to Texas and Nevada for the first online because despite Gov. Brown's recent bill signings California still is less business friendly than the other two states and I predict that some of the environmental groups, who have more influence in Cali than the other states, will mount a challenge for what essentially looks like a 'chemical factory'.

I don't see Arizona or New Mexico for the first couple GFs.

Obviously, this is all opinion. I have been waiting for TM to ask for mine but the phone has not rung. :)

sperber53 | 20. Juli 2014

I doubt proximity to lithium sources will be a deciding factor. How much lithium does a 85kwh battery pack contain? I bet a single semi trailer load of lithium is enough for weeks or months of production.

Mark K | 20. Juli 2014

Sperber53 - that's right. You can make a lot of salad with a boxcar of salt.

Jolinar | 20. Juli 2014

Lithium consists only about ~2% of the battery. Main cost driver is Nickel.

shop | 20. Juli 2014

Lithium is only 2% of the battery if calculated by weight. It is a very light element.

Anyways, Elon has effectively stated that they will be starting the battery factory in multiple locations and whichever one gets through the morass of environmental regulations and red tape the fastest will be the first gigafactory. The other locations will just be put on the back burner until gigfactory #2 and #3 are needed. No need to overcomplicate this...

aljjr2 | 20. Juli 2014

I was always "confused" at the specter of Texas being in the running. The state prohibits direct sales of Tesla, denies climate change; owned by big oil that would rather see Tesla fail to continue their profits. Recognizing business incentives and decisions aside, there is little reason to reward Texas with the technology jobs and revenues. | 20. Juli 2014

Let's see. Cars are built in California. The Models S and X alone will need about half a billion batteries in 2015. That number grows to billions/year when Model III appears. This means that the total transport costs of delivering finished batteries to Fremont will grow rapidly. If Tesla wants to hold down battery costs, they will want to build batteries as close as makes sense to Fremont. That gives California and Nevada an advantage over more distant locations.

negarholger | 20. Juli 2014

The most deciding factor will be labor... can I hire the needed skills and quantity.

We build a factory in an Asian country and forgot to look at that... now we have to pay engineers at 4x cost to live there... labor cost advantage gone up in smoke.

How fast can you ramp up a factory? Only as fast as you can hire and train folks - that is your main limitation.

AlMc | 20. Juli 2014

According to Elon the criteria that TM will use is the speed at which it can be built as it needs to be operational within 2-3 years and fully ramped up in 3-4 years as TM starts ramping up the Model 3 to 500K/year.

Say that all 5 states can get it up and running just as fast (Elon's #1 criteria). What are the other important criteria?

Mine, not in order of importance:

1. Cost to build (land, labor)
2. Infrastructure to support (railways/highways)
3. Cost to operate (tax incentives, labor costs)
4. Availability of skilled labor
5. Proximity to Freemont
6. Proximity to raw materials
7. Prior history with the state (do they support Tesla sales model?)

Anyone have additional criteria?

Baribrotzer | 20. Juli 2014

Another point for California: Personal relationships. Elon knows Governor Brown and various other politicians, plus (I would guess) many of the Silicon Valley big shots, and quite a few Hollywood people. He's one of California's leading citizens. That translates to access, and probably influence. All of which might be worth having to deal with a cumbersome permitting process, a work force that might unionize, and general higher costs.

Building similar relationships in another state would take time he probably doesn't have. Plus money, possibly more than he can afford. Add in a possibly hostile local culture, an untrained workforce, and the lower costs might not be so much lower.

Red Sage ca us | 21. Juli 2014

Hmmm... Less than 250 miles from Fremont to Reno... Home of the Wolfpack... Over 220,000 residents... Nearly 500,000 in Truckee Meadows all told... Most are employed by the schools there... University of Nevada, Reno provided my Forty-Niners with a pretty good quarterback... Apple seems to be using solar arrays there without issue (though NV Energy experiences blackouts)... Here's an article from a week ago:

Tesla gigafactory race brings out Nevada innovators

akikiki | 21. Juli 2014

8. The Henway. Don't forget the Henway.

AlMc | 24. Juli 2014