Tesla has already managed to drive down the manufacturing costs of lithium-ion batteries where others have failed.
Tesla recently stated that its current battery cost is $190 per kilowatt hour (kWh) for the Model S electric car. And they are trying to get to less than a $100 per kWh through vertical integration, adding economies of scale, reducing waste, optimizing processes, and tidying up the supply chain.
“By doing it at a bigger scale they can try and negotiate lower material costs for everything. Those are the elements Tesla are trying to utilise to make their batteries cheaper than everybody else’s’ rather than using some completely new manufacturing method.”
Tesla plans to also manufacture drive units at the plant. With vehicle battery packs, the automaker will be closer to producing its entire next generation powertrains at what is expected to be the largest factory in the world by footprint.
Tesla designed the Model 3 to be relatively easy to manufacture in order to facilitate a ramp up in production. Those design improvements might be easier to implement for the drive units at the Gigafactory where the company will also be producing the battery packs for the Model 3.
The Tesla Model 3 will be the first Tesla mass market car. The Model 3 will start at about $35,000 ($28,000 in the US after a federal tax credit) – which considerably more affordable than its previous models.
Earlier this year, Tesla CEO Elon Musk said that he sees a path for 1 million cars per year to be manufactured in Fremont.
While the statement was met with skepticism at first since the Fremont factory was only producing roughly 500,000 cars per year at its peak when being operated by Toyota and GM, it makes more sense now that we know that Tesla plans to both expand the plant in Fremont and move some of the drive systems manufacturing to Nevada.
Based on the reported second quarter cash flow from customer deposits, it’s difficult to imagine Tesla holding less than 400,000 reservations for the Model 3 at the moment, likely inching closer and closer to 500,000.
The new car is not only more affordable, but at 215 miles range per charge it is more practical than the traditional city-run-around electric car.
There is a definite acknowledgement in the market that demand for electric cars is and will continue to rise. In June Lux Research reported that the battery market for electric cars will rise to $10 billion in 2020 with six large carmakers led by Tesla accounting for 90% of the demand.
At the Paris Motor Show in September Mercedes unveiled its first all-electric car the luxury EV crossover called EQ that Mercedes say can do 310 miles (500 km) on a single charge. The car is only a prototype for now, however. Volkswagen also unveiled its all-new, fully electric car, the Volkswagen I.D. at the show, which it claims will do up to 373 miles per single charge, but the car won’t be available until 2020.
SOURCES- Tesla, Electrek, Power Technology