The site for Tesla’s big battery factory has been announced. The so-called ‘gigafactory’ will be located near Reno in Nevada and the plan is for the plant to be able to produce batteries for around 500,000 cars a year by 2020. Big numbers. Elon Musk wants that kind of volume to drive down the unit cost of battery packs. By then, the plan is that Tesla will be on a third generation engineering architecture with a model called, appropriately enough, ‘Model 3’.
However, it’s interesting to note that here in the real world of 2014, electric vehicles are struggling to gain traction in the global vehicle market. Fundamental issues remain with battery performance and we’re looking at incremental improvements in the future rather than a big leap. Tesla’s solution is to fit pretty hefty battery packs with an 85kWh punch that can offer a claimed 265 miles of range. It doesn’t come cheap and the gigafactory strategy is about moving production cost economics via much higher output. Is Elon Musk the guy who can produce the breakthrough for electric vehicles? He certainly can’t be faulted on his capacity for vision. Supporters would also point to the Model S as evidence that he can execute, too.
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Take a look at the Tesla share price and it would appear that investors are pretty convinced. I was curious to hear Musk himself talking the share price down lately. Musk reportedly said that the market is being “very generous” and that investors are giving Tesla a lot of credit for future execution. Indeed. The share price duly took a short-lived downward correction. Investors came back though. Not only does Tesla have a compelling story, but it has a CEO and founder who is not afraid of straight talking that can harm his own company’s share price!
And the latest talk of more deals with others won’t do any harm. Elon Musk, remember, wants green EV technology to work. That’s his mission. Tesla Motors was set up because he believed that the steps to achieving that end in line with his vision were more likely to come from a start-up than from existing automotive players. But Tesla has worked with others – including Daimler and Toyota – and other OEMs have not stood still when it comes to electrification. Tesla’s relationship with other OEMs is something to watch, particularly in the context of the battery pack volume plans for the gigafactory in Reno.
Elon Musk has talked a good game so far, but much of his project is still to be delivered. Getting battery costs down is the big challenge ahead and could be the most important lasting legacy Tesla leaves.
US: Tesla chooses Nevada for Gigafactory
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By GlobalData
