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Tesla reveals $5 billion Gigafactory, the world's largest battery plant

Justin Hyde
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Tesla Motors
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Tesla Motors

No automaker has quite the momentum that Tesla Motors enjoys today. It sells every car it builds easily, with customers queuing around the globe. It's considered the best car for sale in America by several critics, and Wall Street has bought into Elon Musk's vision with a fervor rarely seen outside riverside baptisms. And yet everything Tesla stands for today and wants to accomplish in the future rides on a single stubborn, expensive piece of technology — the battery. 

Today, Tesla revealed its grand plan for tackling that weak spot, a $5 billion plan to build the world's largest battery plant, dubbed the Gigafactory — one that would power the company from start-up to an auto industry player with 500,000 vehicle sales a year.

Even with all the attention it's received to date, Elon Musk's firm remains a small timer as far asglobal automaking goes. Tesla plans to build 35,000 Model S sedans from its California factory this year; Ford typically builds that many F-Series pickups in about 20 days. All of those cars will rely on lithium-ion battery cells shipped from Asia, where Panasonic and other suppliers control most of the world's supply. While researchers have spent decades hunting for better ways of storing electrical energy, none has emerged as an alternative — and at the moment, there's no technology on the horizon that's better or cheaper.

The price of those cells has been the major reason the Tesla Model S and all other electric cars cost far more than gasoline-powered ones. A few automakers have built their own battery plants in the hopes of driving down costs and ensuring supplies, with Nissan's $300 million Tennessee plant the largest in the United States to date. But none have been built to the scale Tesla would need to supply hundreds of thousands of vehicles a year; the company already uses a third of all electric vehicle battery production.

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In its outline, Tesla says by the time the plant goes online in 2017, the plant to lower its battery costs by 30 percent — which coincides with its plan to launch a third "affordable" all-electric model for roughly $45,000. Three years later, Tesla expects the Gigafactory would produce enough batteries for Tesla to bolt into 500,000 vehicles a year, more lithium-ion battery power than the rest of the world built last year.

The cost for doing so: roughly $5 billion, with Tesla providing up to $2 billion and current battery supplier Panasonic and other partners providing the rest. Tesla says it has narrowed the potential sites for the plant and its 6,500 jobs to four states: Nevada, Arizona, New Mexico and Texas. The company also said today it would raise $1.6 billion to help pay for the plant and developing new models.

When Tesla launched, many executives and critics questioned whether it could ever survive building expensive vehicles limited by battery range and recharging times. If Tesla can open its Gigafactory as planned, and meet the goals it's set, those critics will finally have their answer.

 

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