Battery Factory - Tesla, SolarCity or a New Company?

Battery Factory - Tesla, SolarCity or a New Company?

Will Elon build the new giga-factory under Tesla, SolarCity or form a new company? The batteries will provide juice for both cars and solar grid storage, so I'm not sure how this will shake out. Most people assume the new factory will be built under the Tesla umbrella, I believe there are other options for how this could bake. Elon will do a capital raise for the factory, a new company would be beneficial for buyers in that the stock share price would be significantly less than Tesla's current $210.


NKYTA | 20 febbraio 2014

I'm thinking under the Tesla umbrella as there has been nothing hinted at to the contrary. That, said, nothing would surprise me.

holidayday | 20 febbraio 2014

Solar City will provide power for the factory. Tesla will run the factory, but probably with a partner like Panasonic or Sanyo. (I like Sanyo's Eneloop rechargables, so they have some experience with consumer electronic batteries.)

some forward looking statements have been made, and no guarantees are placed on these statements

PorfirioR | 20 febbraio 2014

I have to admit that this idea may be crazier than my usual but why not control the whole supply chain from cradle to grave?
Here are a few possible candidate partners for the bottom of the pyramid:
There are a number of other small companies also trying to mine large reserves of lithium in Utah.

Sorry Bolivia, Panasonic, and Sanyo. I really don't want to see a cartel of Lithium producing countries, or battery-producing countries, etc. calling the shots in the near future. We need true energy/resource independence away from fossil fuels and not driven to another form of dependence.

If the claims made by Hectatone and WLC are true, their mining techniques would not only produce cheap Lithium right here in America but also make other mining techniques cleaner - for example, by mining the hectorite clay byproduct left from oil and gas drilling.

There are other raw materials and lower level component manufacturers that would need to be brought in, but changing the mining industry (even a little) sounds like a nice bonus in addition to reducing our dependence on foreign sources of energy. If one is going to build the biggest battery factory in the world, might as well try to change the world in the process.

PapaSmurf | 20 febbraio 2014

Joint Venture where Tesla contributes intellectual property about battery pack design, battery management systems, etc.

Panasonic (or other partner) contributes intellectual property for chemistry, cell manufacturing, etc.

Perhaps one or two others also join to contribute lots of cash.

Tesla does not need to own 100% of this. But I suspect Tesla will be the managing entity in charge of the joint venture.

achilles992000 | 20 febbraio 2014

The gigafactory could be a huge competitive advantage. It's a major capital investment that a competitor would have to undertake. Tesla could bring battery costs down with scale and in house production.

A competitor's electric car would be more expensive just on the battery alone and they could produce limited quantities w/o their own factory.

Nexxus | 21 febbraio 2014

This could veery well be the reason Elon was talking to the guys over at Apple. Create a new battery factory that supplies not only the batteries for Tesla, but batteries that fit the form factor Apple needs for their devices. Lump sum investment to help build the factory and ensure they get another supplier for themselves.

Could be a conglomerant deal with Tesla, Apple, Solarcity, and ???

Lot's of companies out there that would love to be in a partnership with Tesla.

Brian H | 22 febbraio 2014

Assuming the factory is in the US, or at least NA, it will represent a huge move of the global battery/storage market "CoG".

Bubba2000 | 22 febbraio 2014

According to this article, the battery factory is going to cost anywhere from $2-$5 or even $10B. Probably in the Southwest US (Texas?). Goal is to cut $K/WH-hr by 50%. Could be a combination of Tesla, Solar City, Panasonic + suppliers of chemicals, electrodes, separators, etc.

I do not think the analysts got a clue about the scope and cost of the plant. My wild guess it could built is stages to optimize economies of scale, reliability. It will be a combination chemical plant, semiconductor like process manufacturing for electrodes+separators and them packaging. Build a pilot plant that would cost less than $1B and then scale with parallel plants. Elon is very cautious about financial risk.

It is quite likely, Tesla will announce a secondary offering and take the opportunity to get some extra cash. As a stockholder, I would prefer a $2.5B secondary with 10% dilution while the market is hot. It would be enough for its % in the battery factory, expansion of the Model S, X assembly to produce 200,000 cars. Enough left to pilot production of Model E.

Model S is a success. Elon needs to quit tinkering with Model X, get rid of the falcon doors... take too long to open, complex, expensive. People like SUVs, not some weird looking SUV+minivan soccer mom image.

Iowa92x | 22 febbraio 2014

I'm also encouraged by the recycling arm of the upcoming plant. Old batteries in one chute, grind or refreshen them, new batteries out the other end. They will be able to eat nearly any type of used battery and recycle. Entire plant powered by solar and wind, no waste material. Engineers will invent new robots as needed to automate everything.

It will be a revolution in manufacturing.

jwspicerjr | 22 febbraio 2014

When will Tesla hold the conference call Elon Musk talked about during the Earnings webcast on Wednesday? I want to make certain I can hear it when it occurs.

Iowa92x | 22 febbraio 2014

I haven't heard an announcement on date/time for the battery factory call, hopefully soon.

Robert Fahey | 22 febbraio 2014

* Does the Fremont plant allow school field trips? It should!
* Will this new factory allow them? It should! And it should have an adjacent theme park called Giggle Factory with battery-powered Model S go-karts. And every kid should get a die-cast Tesla on the way out.

Think I'm joking? I'm not. Get the next generation thinking "This company kicks ass."

Iowa92x | 22 febbraio 2014

@Robert, +1.

Growing up, my dad said "there's no replacement for displacement."

Now there finally is, electro-coupes will make Corvettes look slow.

risingsun | 22 febbraio 2014

I there is a risk though with a new innovation in battery technology that Tesla's batteries could become obsolete quickly.

risingsun | 22 febbraio 2014

Tesla shareholders are short the price of batteries. So I guess building a new battery factory spurs innovation while hedging out some of their risk. Elon is a genius.

jackhub | 22 febbraio 2014

Estimates being made on the cost of the megafactory likely assume current production techniques. Elon has never used the techniques of the industry he is disrupting. I would look for something new.

Spacex is currently using 3-D printing/Additive manufacturing for some components of the rocket engines. I wonder . . . that would certainly finesse some of the assembly issues in battery manufacturing and likely simplify recycling as well.

jackhub | 22 febbraio 2014

Sorry, meant gigafactory.

Bubba2000 | 22 febbraio 2014

Battery factories have adapted over the years to changes in chemistry, electrodes, separators, etc. Panasonic adapted their Li-ion factories to Tesla modifications. Any design has to be flexible to advances in battery tech.

Of course, there is always the possibility of some disruptive tech like totally new chemistry and required format, supercapacitors, etc. Anything like that takes time to get to market, gets tested in the labs, field, etc. Tesla would see it coming and adapt. Initially this kind of tech adapted by hi value users such as the military, space industry, cellphones, etc.

Anyway, by semi conductor standards that Intel uses, the battery gigafactory may be in the same price range.

frmercado | 22 febbraio 2014

Bubba, I hope that Tesla doesn't go to Texas for their gigafactory, not after all the grievance that it has caused to Tesla with its cronyism with the State's car dealers. I think Oregon would be a much better choice, Intel's largest R&D campus and the factory for its first production run for all their processors is based out of Hillsboro, OR just outside of Portland. The State government has given both Intel and Nike a lot of insentives to keep their Business and keep them happy for a long time. Oregon is also very EV friendly; along with Washington they are the only State that have a none Tesla EV fast charging network that covers the entire pacific corridor. No other States have anything like that, not even California. Trust me you can't travel on a non Tesla EV north of San Jose, certainty not north of Chico And not between the Bay Area and LA.

frmercado | 22 febbraio 2014

Also, the Oregon grid is much cleaner than California's.

risingsun | 23 febbraio 2014

Wouldn't a 30 to 40% reduction in battery costs reduce the price of a model S by 10k dollars?

Nexxus | 24 febbraio 2014

No, it would just increase TMC profit on the current Model S. They aren't going to reduce the price of their flagship model just because the batteries got cheaper to make.

They are production constrained right now with the prices where they are at. Why reduce prices when they can't get them out the door fast enough now?

Solution: Model E/Gen III.

GeekEV | 24 febbraio 2014

FWIW, SolarCity already sells Tesla branded battery backs for local storage, so I'm guessing the gigafactory will be operated under the Tesla name. Perhaps "Tesla Energy", or something, rather than "Tesla Motors"...

@frmercado - For Tesla's purpose it would make the most sense to build it next to their car assembly plants to eliminate shipping costs. Although, the battery still gets shipped one way or another (with the car), but why ship it twice? I suppose they could use local battery factories and do the final battery install at the local service center at time of delivery...

Bubba2000 | 24 febbraio 2014

@frmercado, You are right about Texas. Hard to believe, but they run one crooked government there. The oil companies write their own laws and enforcement. I think the state will be hostile to Tesla. There is a reason why Texas has only 5 superchargers so far. Permit delays? Not if it was for a drilling rig or oil/processing facilities!

Oregon and Washington would be suitable because of cheap hyrdo power. However, logistics are important. Plus management can keep control of the battery gigafactory. May be an adjacent plant next to the current location. Deliver the battery packs over dedicate rails powered by electricity, or conveyor belt. I read somewhere that Tesla bought land close by.

I imagine Tesla will develop a matrix with all variables like state incentives, taxes, labor cost and availability, cost of land, cost of electricity/source, transportation, distance, political environment, regulations, etc. So far Tesla has leaned towards vertical integration, and when possible close suppliers, etc. Still they end up in trouble when they pick remote suppliers like for those 21" tires from Eastern Europe, or rugs from Mexico. I feel that most of these parts can be sourced locally.

Outsourcing to distance places, with time zone differences, labor practices, different language, etc can be a disaster, especially for complex projects. That is what happened to the Boeing Dreamliner. Delays, cost overruns, poor quality became the norm. It became the NightmareLiner.

PorfirioR | 24 febbraio 2014

I agree with

A reduction in the cost of the battery would probably not change the sales price of the Model S. It might mean that Tesla increases their margins to 35%, while also giving customers improved battery options (i.e. 70 and 90 KWh).

Let me get back on topic. I am willing to bet that SolarCity will have a very significant role in the new company or joint venture. However, I just can't see Elon Musk wanting to run yet another separate and distinct company, even if only on paper. Investors of both SolarCity and Tesla will see that as a distraction. That's why I think the battery factory will operate as a division of Tesla with a SolarCity partnership, and any other partners must be already part of the supply chain or improve upon it, otherwise they are dead weight (unless they bring cash... Apple?).

This makes sense to me and borrows on the acquisition models used in the space industry where one entity acts as the lead integrator with extensive collaboration between suppliers in the fabrication and assembly processes.

Homebrook | 24 febbraio 2014

Elon Musk likes Texas, why else would he locate SpaceX there? I think Texas would be a great place for the gigafactory. It has a great business climate and an educated workforce. I can't think of a better place.

holidayday | 26 febbraio 2014

"Elon Musk likes Texas, why else would he locate SpaceX there?"

OH, he already has a piece of the Texas pie?

That means he'll find another state. (My guess)

Expanding into multiple states would be good for Tesla, if only for the political clout. Unfortunately, when bringing on a disruptive technology, you need politicians on your side.

Recent news about some states about to ban Google Glass (in cars) before it's actually for sale is an example of this.

Brian H | 26 febbraio 2014

Galveston is one of the most southerly spots in the US, suitable for launching satellites into near-equatorial orbit. Launches are also over water (Gulf of Mexico) for safety.
Here's one of many articles on Brownsville, etc.:

Brian H | 26 febbraio 2014

typo: Brownville

EQC | 26 febbraio 2014

no location or partner specifics, but blog post and pdf link here:

Iowa92x | 26 febbraio 2014

Excellent, thanks EQC.

noel.smyth | 26 febbraio 2014

I'm thinking it will be texas too - ample wind energy and those pesky dealer laws may just go away as part of this

LoganSully | 26 febbraio 2014

I guess that the location for the Gigafactory will be based on availability and price of the large parcel of land needed as well as available and expandable infrastructure (rail lines, highways). Political considerations are very important as well and it's smart to keep the politicians guessing and have them bid against each other to get the best deal for Tesla.

PorfirioR | 26 febbraio 2014

A few take-aways from the announcement:
- 2020 is not really that far away (only 6 years! I am getting old...)
- Construction starts this year but production does not start until 2017.
- 30% reduction in cost might happen even without the gigafactory. Tesla might be hedging.
- No mention of SolarCity. Wouldn't it be funny if Elon made an announcement for SolarCity saying that they are not aware of Tesla's intentions? LOL
- 500 vehicles/yr by 2020! That is more than a gigafactory announcement. Those vehicles have to be built somewhere.
- Gigafactory pack output greater than cell output, meaning that Tesla expects some volume of finished cells from suppliers or perhaps recycling.

Brian H | 26 febbraio 2014

Solar City manufactures nothing. It leases out equipment it acquires on the open market. It will use batt-fac output, but not contribute to making it.

Iowa92x | 26 febbraio 2014

Port, I was confused on that stat about pack output vs. cell output. Does the cell output perhaps mean the battery output available to other manufactures such as Apple, above and beyond the car pack output?

PorfirioR | 26 febbraio 2014

I believe the plan factors in existing agreements with Panasonic and Samsung SDI for supplying cells to Tesla. It may be a carrot on a stick.

If you look at pages 1 and 3 of the PDF, the Gigafactory's cell output at 2020 is projected at 35 GWh/yr. Page 3 says that the battery pack output will be 50 GWh/yr. There is a 15 GWh/yr difference. One has to assume that the difference must come from suppliers as already manufactured cells. Back to page 1, you can see that no single supplier can probably fill that gap (yet). If you add Panasonic's and SDI's entire output you come close.

carlgo | 26 febbraio 2014

@iowa96 "No replacement for displacement".

Sorry, but what wins in the end is inevitably: Cubic Money.

PorfirioR | 26 febbraio 2014

I just noticed a typo in my earlier post, I meant 500,000 vehicles by 2020. Sorry about that.

Bubba2000 | 26 febbraio 2014

Independent of the Battery Gigafactory plans, Tesla is ramping the auto factory rapidly. In the end half of 2014, Tesla will have an even larger manufacturing and assembly facilities, next to the existing... per conference call. What will be the total capacity with 2 shifts, increased automation? 100,000/year rate for Model S+X? Or more since demand for the X is expected to be greater than S?

In the auto business, 100,000/year factory is no biggie. Tesla uses a hi level of automation, robotics, etc. Also, the BEV design is ideal for automated factories. Meanwhile, per the cc, Tesla is optimizing design, manufacturing to increase production. Costs will fall steeply, especially excluding the batteries.

I think that Panasonic will be able to step production of existing plants with incremental investment, process optimization, etc long before 2017 till the battery gigafactory starts.

I think that Tesla could sell 200,000 S+X worldwide, if they get their SC network deployed in major markets, improve few thing in the autos, offer AWD. Longer battery ranges for the hi end market. Porsche is expected to sell that much this year.