Tesla: We Got The Power!

Image: latimes.com

The short story of Tesla Motors has been more about exciting cars and stellar share price performance than other more mundane manufacturing news, but next week the company will be revealing its plans for the much less exciting or innovative key to its long term future. Yes, it would appear that Tesla is almost all grown up now as it is to announce the plans for that essential component for all electric vehicles, a huge new lithium battery factory that has already been dubbed the “Gigafactory” by Tesla’s founder, Elon Musk.

To date, the cost of the battery has been making the cost of the Tesla too expensive for most. This new plant is seen as the way to produce an ‘affordable’ long range electric car and do it in substantial numbers so that Tesla can achieve critical mass and join the ranks of the major automakers.

The plant will be massive and, in a typically brash statement from Musk, he claimed that it would equal the current output of all the factories currently manufacturing li-ion batteries around the world, including all the batteries going into laptops and phones. Panasonic, who currently supplies the batteries to Tesla, will likely be a partner in the plant.

Tesla has previously complained that it would be making more cars if it were not for the constraints placed upon it by the supply of batteries which is currently in limited supply. Musk has always maintained that the goal is to sell a car for the mass market, priced between USD30 000 and USD40 000, that can travel at long distances on only an electric charge.

So far he has got a part of the equation right as the Model S allegedly has a range of 200 miles. But the car’s selling price is currently USD69 000 and the plan is only for sales of 35 000 cars this year. Tesla is known to want to sell more than 10 times that number to emerge as a major player. Musk is banking the future on li-ion technology even though some analysts see a long term problem with the li-ion battery. (Read: Toyota Thinks It’s Time To Rethink The Lithium Battery, General Motors Disagrees)

Thus far there has been no information forthcoming on the cost of the plant but estimates have ranged from USD2 billion to USD10 billion, and it will be located in one of these states: Nevada, New Mexico, Arizona or Texas. Musk has hinted that there would need to have some form of rights issue to raise some of the cash needed.

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