Tesla Wants A Gigafactory Or Two Ready By 2017

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Elon Musk wants his new gigafactory to start producing mass-market electric cars in three years. In point have fact, he may want two gigafactories doing it.

Late last week, Bloomberg reported that Musk — the founder and CEO of electric-car-maker Tesla Motors — is close to naming two sites for the project. Tesla has been looking at multiple possible locations in Arizona, Nevada, New Mexico, and Texas, and wants to time the gigafactory’s start-up with the release of a new car model aimed more at the average consumer.

“What we’re going to do is move forward with more than one state, at least two, all the way to breaking ground, just in case there’s last-minute issues,” Musk told Bloomberg. “The number one thing is we want to minimize the risk timing for the gigafactory to get up and running.”

It’s quite a goal. The proposed gigafactory would produce 500,000 of Tesla’s lithium-ion battery packs a year — making it the world’s largest single producer, and doubling global supply of lithium-ion storage. With ground on the factory not even broken yet, the whole thing will need to be up and running in three years to coincide with the release of the new model. That will require designing and prepping the model as the gigafactory itself is put together, and orchestrating both into a concurrent roll-out.

“There are a lot of moving parts, a crazy amount of moving parts,” Musk said. “If there’s a laggard there, we’ll have this massive facility and a ton of people trained and no ability to recoup revenue. It will be quite a bad situation.”

And while the primary reason for prepping two sites is redundancy, Musk added that the optimistic scenario is Tesla winds up needing more than one factory in the United States.

The company currently produces electric cars aimed at the high-end consumer market; its Model S sedan goes for $69,000, before sales taxes and tax credits and so on. The goal is to cut that price in half for Tesla’s new model, resulting in a car that can at least begin to push its way into the midlevel consumer market.

The role of the gigafactory itself in that ambition is to cut the price of the batteries by 30 percent using economies of scale: As a factory’s size goes up, the number of batteries it can crank out goes up faster than the total costs of building and running the factory itself. That brings the cost per unit down, which will allow Tesla to cut the prices it charges the consumer.

Jeff Chamberlain, the Deputy Director of Development and Demonstration for the Joint Center for Energy Storage Research at Argonne National Labs, estimated that Tesla’s 60 kilowatt-hour battery currently costs somewhere between $15,600 and $24,000, based on the battery research that’s going on around the world. No one outside of Tesla actually knows, and the company itself is understandably secretive. But if Chamberlain is correct, the 30 percent cut from the gigafactory could shave $5,200 to $8,000 off the cost of Tesla’s cars all by itself.

“The market ought not to write off Tesla’s attempt to grow their market share with their untraditional approach to the technology and business model,” Chamberlain added. “Elon Musk has now shown, in the last two years especially, that we should take Tesla seriously.”

Tesla has raised $2.3 billion in convertible note sale to fund the gigafactory, and will ultimately need $5 billion to complete the mammoth project — which, when completed, could employ as many as 6,500 people. Along with the battery packs for cars, the gigafactory would also produce batteries for the solar systems Musk sells to homeowners and businesses through SolarCity.