January 05, 2017

Gigafactory Battery-cell production begins

The start of Tesla Gigafactory battery mass production is a huge milestone in Tesla’s quest to electrify transportation, and it brings to America a manufacturing industry—battery cells—that’s long been dominated by China, Japan, and South Korea. More than 2,900 people are already working at the 4.9 million square-foot facility, and another 4,000 jobs (including temporary construction work) will be added this year through the partnership between Tesla and Panasonic.

By 2018, the Gigafactory, which is less than a third complete, will double the world’s production capacity for lithium-ion batteries and employ 6,500 full-time Reno-based workers, according to a new hiring forecast from Tesla. The company’s shares, having touched their highest point since August, closed up $10 at $226.99 in New York trading.

Temporary exterior walls are repositioned to accommodate new sections. The factory doubled in six months and is now 30 percent complete.Source: Tesla, annotations by Bloomberg

Tesla initially promised to provide full-time jobs to 4,000 local residents by 2019 and 6,500 jobs by 2020. In May, Tesla moved its forecast for peak battery production at the Gigafactory up two years, to 35 gigawatt hours of cell production and 50 gigawatt hours of pack production by 2018

For Tesla to succeed, battery production is crucial—there simply aren’t enough lithium-ion batteries being made anywhere for Tesla to achieve its goal of 500,000 Model 3 sales by 2018. Equally problematic is the fact that current market prices are too high for the $35,000 car to be profitable. Tesla took its unprecedented leap into the desert in the hope that the massive scale of the $5 billion Gigafactory would drive down costs, and demand would arrive just in time to keep it all afloat.

Batteries are the limiting factor for electric cars, but few automakers have made a similar commitment to producing them, choosing instead to let suppliers like LG Chem and Samsung shoulder the risk. In 2015, 88 percent of the global lithium ion cell manufacturing took place in China, Japan, and South Korea, according to a report by the Clean Energy Manufacturing Analysis Center.

The cells produced at the Gigafactory today will be used to fill more energy-storage products until cell production for the Model 3 begins in the second quarter, according to Tesla.

Tesla also aims to begin shipping the Powerwall 2 home batteries by the end of January, at prices that by some estimates are 30 percent cheaper than the closest competitor. “We believe Tesla battery sales are accelerating," said Baird analyst Ben Kallo, who recently listed Tesla as the best stock pick for 2017. “The ramp of Tesla Energy and Model 3 production could exceed expectations.”

Bloomberg forecasts that batteries used for electric cars will go up by 10 times by 2024.

SOURCES- Bloomberg, Tesla Motors

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