Tesla, Panasonic Team Up for "Giga" Battery Factory

Photo: Ruaridh Stewart/Corbis

ATesla model S chassis and battery in the Mission Viejo, Calif. mall showroom.

Tesla Motors this week announced they’d inked a deal with battery-maker Panasonic for a proposed battery “gigafactory.” The electric car automaker also provided some substance to the rumors that the factory will be sited in Reno, Nev.

The announcements appeared on the company’s website on the same day as its second quarter earnings call and letter to shareholders.

The cooperative arrangement has Tesla managing the factory, with Panasonic providing the expertise and investment to manufacture the individual cylindrical lithium-ion battery cells. (Tesla and Panasonic have previously committed to building the car’s battery packs around the industry-standard, slightly-bigger-than-A-cell-sized cylindrical “18650” battery cells. Nothing in their latest announcement leads one to suspect any deviation from their 18650-based battery pack design.)

 Tesla hopes to drive the price of their many-cell battery configurations down by as much as 30 percent with the new Gigafactory, due to economies of scale and reduced shipping, duty and inventory costs. And it'll need a lot of the factory's output, between the Model S—which Tesla now projects to sell 35,000 of this year and 100,000 in 2015—and a hotly-anticipated SUV-crossover Model X. Battery pack price is the largest contributing factor in determining Tesla’s sticker price: The Model S today sells for $69,900.

And while the Gigafactory will undoubtedly be kept busy with Tesla's needs cars, the company’s CTO J.B. Straubel hinted that the facility might also be producing batteries for other purposes. (For instance, some hint that Tesla might explore entrance into the solar and wind grid energy storage market?)

The company’s Gigafactory, Straubel said in Tesla’s announcement, “sets the path for a dramatic reduction in the cost of energy storage across a broad range of applications.”

Moreover Tesla’s second quarter letter said the company had broken ground outside Reno, Nev. “on a site that could potentially be the location for the Gigafactory.” Yet the same letter also mentioned other possible sites in Arizona, California, New Mexico, and Texas. The final decision on the site’s location, it said, would be made “in the next few months.”

Tesla’s letter further revealed the company had delivered 7579 Model S cars during the second quarter getting $16 million in revenue, but netting the company a $62 million loss. (The losses could in part come from the substantial investment the Gigafactory, which Tesla projected to be between $750 million and $950 million in 2014 alone.)

Tesla CEO Elon Musk stoked further speculation that the Gigafactory isn’t the only thing up the company’s sleeve either. “We’re not showing all of our cards,” he said about the company’s R&D spending.

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