Could Tesla 'Gigafactory' Bring EVs to the Masses?

Tesla Motors plans to build a huge battery factory in hopes of making electric cars affordable for the masses. Known as the “Gigafactory,” it would be the world’s biggest facility of its kind, and would enable Tesla to control manufacturing from the raw materials on up to the finished battery pack. Tesla executives see the factory as an integral part of the company’s plan to build a “compelling, affordable electric car” by 2016.

Industry analysts say the plan hinges on a paradigm shift -- widespread adoption of electric vehicles in virtually every corner of the automotive market. “It’s really reliant on the idea that Tesla can go after the mass market, which is not proven by any means,” Kevin See, senior analyst for Lux Research, told Design News.

Tesla has not yet officially announced plans for the factory, but in a shareholders’ statement it indicated that it plans to integrate cells, modules, and packs at the facility. It would be a departure for the upstart automaker, which currently buys cylindrical 18650-sized cells from suppliers, places them in modules, and then assembles the modules into huge packs containing about 7,000 cells.

By employing vertical integration, rather than relying on outside suppliers, Tesla executives believe they can extract costs from the battery manufacturing process. “It’s about controlling the value chain,” See told us. “They want to be able to control the process all along the supply chain and ultimately improve their costs.”

The plan is consistent with what Tesla CEO Elon Musk declared in June 2013. At an annual shareholders meeting, he said he aimed to roll out a smaller version of the well known Model S for about half the price by 2016. If it indeed costs half as much, it would carry a price tag of $30,000 to $40,000.

Today, Tesla sales represent about one-tenth of one percent of the US market.

If the plant does reach fruition, it would put Tesla in a potential position of competing against other lithium-ion battery suppliers, many of which are not running at full capacity. Panasonic Corp., which now serves as a supplier to Tesla, is reported to be considering an investment of $979 billion in the new plant.

Analysts said the costs of such a plant would be astronomical, and would likely put Tesla in the position of having to sell batteries to other markets, such as the stationary power market, to pay for the factory. “You’d have huge overhead costs associated with it,” David Hurst, analyst for Navigant Research, told us. “You’d have machines, land, taxes, security, electrical, and maybe employees, too. And you’d have to pay for those things, whether or not you’re running the [manufacturing] lines.”

A Tesla representative told Design News that the company is not yet ready to release details on the Gigafactory. Timing of an official announcement has not been determined, the rep said in an email.

Analysts believe that much still needs to be done before Tesla can take on such a project. “As much momentum as the company now has, it’s still catering to an early adopter audience,” See told us. “If you’re going to talk about building the biggest battery factory in the world, you first need to have a product that appeals to the mass market.”

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