Tesla Gigafactory one year ahead of schedule

Tesla Motors has revealed its much anticipated Gigafactory, presently being constructed in Nevada, USA, is up to one year ahead of schedule as preparation for the site continued in Q4 2014 at an accelerated pace.

The company only broke ground at the site in June 2014, but is expected to start producing batteries at the $4-5bn plant within the next two years.

Tesla has also revealed that it is not only targeting electric vehicle (EV) batteries with the Gigafactory output but also stationary storage applications to store the intermittent energy generated from wind and solar sources.

“By the time the Gigafactory reaches full, annualised production in 2020, we expect battery pack production capacity to reach 50GWh,” Tesla Motors explained.

“Of this, we expect to build 35GWh of cell production capacity at the Gigafactory and purchase 15GWh of cells from other manufacturers, potentially including Panasonic.”

The rapid progress in Nevada has also meant that the Gigafactory batteries will be used in the Model S and the Model X in addition to Tesla’s new mass market vehicle, the Model III due for launch in 2017.

The goal for the company is to reduce the cost of manufacturing batteries by up to 30% and drive down the cost of EVs in a bid to spark mass uptake.

Gigafactory supply agreements close

Tesla also explained that it was close to announcing other partners to add to its agreement with Panasonic in September.

“Additional Gigafactory partners will be finalised shortly to create a fully integrated industrial complex,” Tesla explained.

“Although planning discussions with production and supply chain partners continue to progress well, to date we have not formalised any agreements with any other partners.”

The key question for Benchmark readers is whether that means raw material partners and those companies that will supply graphite, lithium and cobalt to the Gigafactory.

Benchmark Mineral Intelligence believes that the market should not expect any agreements with mineral and metal companies until well into 2015.

With a project the sheer size of the Gigafactory, Tesla will have to deal with hundreds if not thousands of suppliers. For example the Model S uses 2,000 parts purchased from 300 suppliers globally many of which, the company admits, are single source suppliers.

For the company, locking in partners with upstream experience of producing lithium-ion cells is critical as it has no previous experience in this. At present it has only enlisted Panasonic as a partner but that is purely to build the cell manufacturing area of the Gigafactory.

Tesla will need to establish its own supply chain and negotiate its own raw material contracts independent to Panasonic.

But first, the next major expected step is securing the know-how for the production of cathode, anode and separator materials – the three key components to a lithium-ion battery. Once this experience is in place, then one would imagine Tesla would seek to secure the raw materials they will need.

It is an interesting conundrum for Tesla however.

If the Gigafactory was at capacity today, together with existing global demand levels of 35GWh of cells, the company would not be able to buy the battery-grade raw materials it needs.

The additional capacity would simply not be available to supply the Gigafactory’s needs and the rest of the world at the same time.

With the grand project, what Tesla is asking the world to do is to more than double the output of battery raw materials in a fraction of the time it would normally take to develop and at huge risk to suppliers.

Therefore while it may be prudent for Tesla to learn the supply scene for these minerals and choose the best deal, time is not on the side of the planners, especially with a Gigfactory a year ahead of schedule.

Any raw material or precursor supplier – whether a new mine prospect or an existing producer – will need at least two years to prepare for a Gigafactory supply surge.

The race is most definitely on.

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