Tesla and Panasonic last week signed what is effectively a memorandum of understanding regarding their collaboration on Tesla’s Gigafactory — a large-scale battery manufacturing facility.
The agreement sets out the responsibilities of both partners, but there will be further discussions over the details.
When completed sometime in 2017, the Gigafactory will address one of the major problems holding back production of Tesla’s electric vehicles: the shortage of batteries.
The Gigafactory will let Tesla produce 500,000 vehicles a year, according to “Planned 2020 Gigafactory Production Exceeds 2013 Global Production,” a 2013 report from IIT Takeshita.
The Gigafactory “will be a huge boost for the electric vehicle and battery industries” in addition to boosting the infrastructure required to support the success of electric vehicles, Vishal Sapru, energy and environment research manager at Frost & Sullivan, told TechNewsWorld.
Divvying Things Up
Panasonic will invest in equipment to manufacture battery cells, while Tesla will “prepare and provide the land, buildings and utilities for the Gigafactory, invest in production equipment for battery module and pack production, and be responsible for the overall management of the Gigafactory,” CEO Elon Musk and CFO Deepak Ahuja told investors in the company’s Q2 2014 shareholder letter.
“Tesla has raised approximately (US)$2.3 billion for the Gigafactory already,” Frost & Sullivan’s Sapru said. It’s tough to estimate Panasonic’s contribution right now, but the company “is in a position to contribute at least a billion dollars.”
Other details are being worked out.
“I cannot expand on details of our relationship with Panasonic beyond what was released in this morning’s announcement,” Tesla spokesperson Alexis Georgeson told TechNewsWorld.
Tesla will announce additional Gigafactory partners for production of cell precursor materials over the next few months.
Takeshita lists possible other partners as Lichen, BYD, BAK ATL, Maxell, Sony, LGC and SDI.
Site selection, initial project design, partner discussions, zoning and design/build will be completed and facility construction will begin in 2014, Takeshita projected.
Construction of the facility is scheduled for completion by end the end of 2014 or early 2015; equipment installation will run through 2016 into early 2017; and production launch and ramp will commence in 2017.
The Gigafactory will be on a site measuring 500-1,000 acres. It will require up to 10 million square feet on one or two levels, and it will use solar and wind power.
It will employ 6,500 staff.
Tesla and its partners will invest $4-$5 billion in the Gigafactory through 2020, Takeshita estimated.
Tesla itself will directly invest $2 billion.
What Remains to Be Done
Contractors began clearing land outside of Reno, Nevada, for the Gigafactory, but work on that project has been halted and Tesla is looking at other locations in Arizona, California, New Mexico and Texas.
The final site for the first Gigafactory will be selected soon, Tesla said.
It had better be. Tesla “must decide on a place soon in order to keep to this timeline,” Frost’s Sapru pointed out. “It’s not just the place but the infrastructure support that needs to be put in place.”
Tesla also needs to line up the other partners and finalize agreements with them.
Where Is the Man With All the Money?
The Gigafactory is aimed at helping Tesla produce and offer vehicles at lower cost.
“Clearly this is a case of go big or go home,” Roger Lanctot, associate director of the global automotive practice at Strategy Analytics, told TechNewsWorld. “The only way to get battery prices to low cost is to scale.”
Tesla is banking heavily on the China and Hong Kong markets, although some of its customers in China have been angered by late delivery of their vehicles.
Further, Tesla is “disrupting local [Chinese] producers like BYB, which is completely focused on electric vehicles,” Lanctot said.
However, the Chinese “like to embrace the latest and greatest,” he noted, “and they have the money to do this.”