Earlier this year, Tesla’s CEO, Elon Musk, shared his plans to build a gigafactory to manufacture enough lithium-ion battery packs by 2020 to power as many as 500,000 electric vehicles. Since then, he has been wasting little time to make these plans a reality. This month, Forbes.com and Automotive Engineer magazine reported that Tesla has signed a deal with Panasonic to work together to build the manufacturing facility. In this deal, Tesla would manage the site and Panasonic would provide lithium-ion batteries and other related equipment.
The gigafactory would reduce battery costs by more than 30% per kilowatt hour. Currently, the lithium-ion battery used in Tesla vehicles accounts for approximately 25% of all costs. Decreasing the cost of batteries is required to make it possible for Tesla to produce an electric vehicle that would sell in the mid-$30,000 range in addition to its current model S and an upcoming model X (a sport utility vehicle).
The gigafactory is expected to house all aspects of battery production within one large structure that could cover 10 million square feet. Tesla indicated it would like to build the facility in the western or southwestern part of the U.S. to be near its auto assembly plant in Fremont, California or at least near a transportation hub that makes logistical sense. Since this facility is estimated to bring 6,500 jobs with it, states in these regions have been vying to offer it a home. The states that were originally under consideration included Arizona, Nevada, New Mexico and Texas.
California was originally left off the short list due to cumbersome regulatory obstacles that would make it difficult for Tesla to hit its 2017 time frame for battery production. In order to at least put California into contention, Governor Jerry Brown has been trying to get a regulatory package through the California legislature that would speed up the environmental review process. According to Greencarreports.com, California could also offer Tesla tax breaks of up to $500 million (this is roughly 10 percent of the gigafactory’s anticipated price tag).
While the states continue to come up with packages to lure Tesla, Musk has mentioned on more than one occasion that he may begin site development work in two or three states to ensure crucial time will not be lost once the final decision is made. According to site selection experts, starting work at two sites is not unusual, but doing so at three sites definitely is not the norm. Since Musk is an innovator who operates outside the norm, this should not be a surprise.