Sparks, Nev.( AP) — It’s Tesla Motors’ biggest gamble yet: a massive,$ 5 billion mill in the Nevada desert that could virtually double the world’s production of lithium-ion batteries.
Tesla officially opened its Gigafactory on Tuesday, a little more than two years after construction began. The mill is about 14 percent complete, but when it’s finished, it will be about 10 million square feet, or about the size of 262 NFL football fields. That will make it one of the largest builds in the world.
The factory is key to the future of Palo Alto, California-based Tesla. The 13 -year-old electric car company, which has never made a full-year earning, wants to transition from a niche maker of luxury vehicles to a full-line maker of affordable cars, pickups and even semi-trucks. It also runs Tesla Powerwall, a solar energy storage business for homes and businesses.
The company tells inducing its own lithium-ion batteries at the scale the Gigafactory will enable will reduce its battery costs by more than a third by 2018. Tesla CEO Elon Musk said the factory could easily applies 10,000 people in the next three to four years.
Most instantly, Tesla requires the batteries for its fourth car, the Model 3 sedan, which is scheduled to go on sale at the end of next year. At a starting price of around $35,000, the Model 3 is likely to be Tesla’s least expensive vehicle, partly because of battery cost reductions. The batteries for Tesla’s current vehicles, the Model S sedan and Model X SUV, are stimulate in Japan.
Tesla unveiled the Model 3 at the end of March. Within a week, more than 325,000 people had put down a $1,000 deposit to reserve the car. After seeing that level of demand, Tesla moved its production plans forward. The company now tells it will stimulate 500,000 vehicles per year by 2018, two years earlier than scheduled.
To meet that goal, Gigafactory construction is proceeding at a furious pace. Inside the factory, Tesla’s partner, Panasonic Corp. which has invested $1.6 billion into the factory is installing machines in sealed, humidity-controlled rooms that will start inducing battery cells before the end of this year.
Panasonic is also shipping cells from Japan to the Powerwall business, which is operating in another segment of the factory. Robots are used to place battery packs into home and office units, which store energy from solar panels and allow users to tap it during peak periods. Musk said the Powerwall business was originally make up about one-third of the Gigafactory’s output, but eventually could expand to around half.
Outside, virtually 1,000 employees are laying the groundwork for the factory’s expansion, excavating furrows and erecting steel subsistences in the hot, dusty valley. By the second one-quarter of 2017, 31 percent of the factory will be completed. Eventually, the roof will be covered in solar panels.
Musk noted that some of the area’s 10,000 wild ponies often drink from the ponds at the construction site. Nevada won the factory thanks in part to $1.3 billion in tax incentives, which will benefit Tesla over a 20 -year period.
“I find this to be quite romantic, ” he said. “It feels like the wild West.”
The factory’s name stems from “giga, ” a unit of measurement that represents billions. One gigawatt hour is equal of making one billion watts for one hour one million times that of one kilowatt hour.
Tesla tells the factory is likely to be creating 35 gigawatt hours of batteries by 2018. That’s the equivalent to the entire world’s production in 2014. Tesla CEO Elon Musk has said the factory has the capacity to produce 150 gigawatt hours if it needs to. To set that in context, New York City employs around 52 gigawatt hours of energy per year.
Analysts tell bringing battery production in-house, instead of buying batteries like General Motors Co. and other major automakers do, can help bring down costs, but also leaves Tesla uncovered. If the Model 3 is delay, for example, or customers’ deposits don’t turn into actual marketings, Tesla will have extra batteries on its hands and no way to recoup its costs.
“They could be left with a lot of excess capacity in the very near word, ” said Sam Abuelsamid, an analyst with Navigant Research. Abuelsamid says there’s also the possibility that advances in battery technology in the longer term could force Tesla to stimulate expensive new investments.
There are also competitors who could derail Tesla’s dreams. Chinese automaker BYD Co ., which is backed by Warren Buffett’s Berkshire Hathaway Corp ., also induces batteries and energy storage systems and is already house battery-powered bus in the U.S. The company hopes to bring low-cost electric cars to the U.S. in a few years.
Musk says there are still plenty of ways for Tesla to reduce costs, including inducing its factories more efficient and eventually constructing more battery factories in Europe, China and other regions where its cars are sold.
The company also is using a different type of battery cell in the Model 3 than it did in the Model S and Model X in an effort to reduce costs.
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