Guest Blog Post: Charles Morris is the Senior Editor of Charged, the magazine of electric vehicles, for which he writes a daily blog and regular print articles. He's also written five books including Tesla Motors: How Elon Musk and Company Made Electric Cars Cool, and Sparked the Next Tech Revolution.
The “truly gargantuan battery factory of mind-boggling size” that Elon Musk first mentioned in September 2013 has started producing battery cells — an accomplishment of unprecedented speed for the auto industry. The cells now rolling off the line at the Gigafactory are destined for Tesla’s Powerwall and other energy storage products and, beginning in the second quarter of this year, the Model 3. The sprawling Nevada plant is already assembling utility-scale Powerpacks for Southern California Edison, which has ordered 20 megawatts/80 megawatt-hours of energy storage as part of an effort to prevent blackouts. The announcement came on the heels of a private investor meeting with Musk at the Gigafactory earlier this week.
Above: Tesla CEO Elon Musk speaks with investors this week at the Gigafactory (Instagram: kyanisaurus)
The Gigafactory officially coming online is a historic event — a big win for American manufacturing in an industry that’s currently dominated by China, Japan, and South Korea — these three countries shared 88% of the global market for lithium-ion cells in 2015. Over 2,900 people are already working at the 4.9-million-square-foot facility (less than a third of its eventual size), and Tesla and Panasonic expect to have 6,500 full-time employees at the site by 2018. The Gigafactory is an imposing illustration that the future of manufacturing lies in high-tech clean energy, not in 20th-century smokestack industries.
Above: Model S and X are dwarfed by the massive Tesla Gigafactory (Instagram: decampkev)
Even though the investor meeting with Musk at the Gigafactory was quite secretive — no video of the talk/tour was released (edit: audio now available, see bottom of post) — Morgan Stanley analyst Adam Jonas wrote, "As the bus drove up to the massive plant yesterday morning, one could not help but notice the hundreds of cars in the parking lot from the construction crew (yes, roughly 1/2 of the vehicles were pickup trucks), part of 2,100 construction workers running two shifts per day. To the extent that the creation of high-tech manufacturing jobs in the United States is a priority of the incoming administration, we believe Mr. Musk might have some interests that could be very much in alignment with those of President-elect Trump."
Above: Tesla Model 3 seen inside the Gigafactory (Instagram: decampkev)
Furthermore, Electrek reported that investors attending the closed Gigafactory meeting relayed that Elon Musk had actually said that: "The President-elect has a strong emphasis on US manufacturing and so do we. We are building the biggest factory in the world right here, creating US jobs… I think we may see some surprising things from the next administration. We don’t think they will be negative on fossil fuels… but they may also be positive on renewables." To add more intrigue, yesterday Musk arrived at Trump Tower to meet with senior Trump staff.
Above: Tesla co-founder and CTO J.B Straubel joins CEO Elon Musk at the Gigafactory (Instagram: decampkev)
Other Wall Street analysts provided feedback from their Gigafactory meeting from with Musk. RBC Capital Markets analyst Joseph Spak reported back that the Gigafactory is indeed "extraordinarily impressive and massive... [and] we gained confidence that the Gigafactory time line is on schedule." And, Oppenheimer’s Colin Rusch, said of the meeting that Tesla “bulls got much of what they wanted.” On Thursday, a Barclays research note even went so far as to include "Elon Musk delivers Model 3 on time or [a] battery breakthrough" as a possible Black Swan event that could increase volatility and negatively impact the entire oil sector.
Above: Video of Tesla/Panasonic 2170 battery cell in production (Youtube: Electrek*)
In any event, for Tesla, the Gigafactory is an absolutely necessary component of the company’s master plan. Without it, Tesla could never come anywhere near its goal of 500,000 Model 3 sales by 2018, because the world simply doesn’t have enough lithium-ion battery production. Furthermore, for Model 3 (and EVs in general) to be profitable, battery prices will need to be reduced significantly. Tesla is counting on the massive scale of the $5-billion Gigafactory to drive down costs enough to make its EVs truly competitive with legacy vehicles.
Gigafactory Audio Recording