Tesla Gigafactory 1 has 35% battery cost reduction to about $124/kWh and Tesla planing for 3 more Gigafactories

Tesla was aiming for at least a 30% reduction from its battery cost for Gigafactory and it now claims a “35% cost reduction” in a new promotional video.

Starting from the “less than $190/kWh” cost and applying a 35% reduction leads to “less than $124/kWh”. If we assume a 55 kWh battery pack, the battery in the base Model 3 would cost “less than” $6,875. While it would still likely be the most costly component in the car, it’s starting to become reasonable in a $35,000 vehicle.

The “holy grail” of battery cost, meaning when most battery-powered vehicles will be cost competitive with gas-powered ones even before accounting for gas saving, is believed to be $100/kWh. In the past, Musk said that he would be “disappointed” if Tesla doesn’t hit the milestone before 2020, but that was before they accelerated the Gigafactory production plan by two years in order to meet the new Model 3 production plan.

Tesla’s current Gigafactory 1 will be the largest factory building in the world by footprint. Tesla is looking to finalize the locations of future plants by the end of this year.

Installation of Model 3 manufacturing equipment is underway in Fremont and at Gigafactory 1, where in January, we began production of battery cells for energy storage products, which have the same form-factor as the cells that will be used in Model 3. Later this year, we expect to finalize locations for Gigafactories 3, 4 and possibly 5 (Gigafactory 2 is the Tesla solar plant in New York).

• 201 MW of solar energy generation deployed in Q4
• 98 MWh of energy storage deployed in Q4

Tesla expects to deliver 47,000 to 50,000 Model S and Model X vehicles combined in the first half of 2017, representing vehicle delivery growth of 61% to 71% compared with the same period last year. In addition, both GAAP and non-GAAP automotive gross margin should recover in Q1 to Q3 2016 levels and then continue to expand in Q2 2017.

They expect to invest between $2 billion and $2.5 billion in capital expenditures ahead of the start of Model 3 production. They continue to focus on capital efficiency while also investing in battery cell, pack and energy storage production at Gigafactory 1.

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