PV Talk: Why Tesla needs the Gigafactory

Share on facebook
Share on twitter
Share on linkedin
Share on reddit
Share on email

Tesla’s much talked about Gigafactory should be up and running in 2017. The Elon Musk-owned EV maker is hoping to use it to produce up to 500,000 battery packs a year by 2020, amounting to around 50GWh. That claim was met with scepticism by one source, Lux Research, questioning the likelihood of even the biggest player in the EV market meeting that target, even if the company is also able to call on its deal to supply stationary storage to SolarCity and its partner in the Gigafactory, Panasonic.

However, Dean Frankel from Lux told PV Tech Storage that his analysis firm did not think the ‘500,000 packs by 2020’ claim was make-or-break for Tesla, with the company still in a good position to claim a competitive advantage by building the Gigafactory. The dust has cleared a little since it was announced at the beginning of last month that the Gigafactory will be built in Nevada, so PV Tech Storage asked Frankel about some of the other talking points of the plan.

Tesla claims the Gigafactory will lower costs by around 30%. Image: Tesla.

Why does Tesla need the Gigafactory?

There are three key components here. Cost reduction, localising a supply chain and reaching economies of scale by making sure their partners will scale alongside them. When we talk about EVs, cost is a key component. Can you get a battery cheap enough such that people will buy your batteries in bulk? Ultimately cost won’t be the major concern for the consumer going to adopt EVs.

It will be other factors, like charging infrastructure or whether the car looks nice, which is what’s normally considered in consumer adoption, as well as performance. So we know EVs have the performance, we know Tesla can make a car that looks nice.

Tesla Model S. Image: Tesla.

And costs?

They claim they can get those down by 30%. We were projecting that we think there’ll actually be a 20% reduction versus their already low 2020 figures. Let me put numbers on that. Right now, industry average production for LG Chem Power, [which is] selling to the Volt or Nissan Leaf through its joint venture, is over US$300 per kWh for a battery pack. Tesla is already lower than that at around US$275 or US$274 per kWh for their battery pack. If they never build the Gigafactory, if they just do what they’re doing now through Panasonic, they will get costs down to US$245 per kWh. If they build the Gigafactory, they will see improved economies of scale, they will have a localised supply chain to reduce shipping costs, and they’ll improve [battery] chemistry.

So those three combined will lead to around a 20% to 30% cost reduction for Tesla but then what does that do for the consumer? If you’re talking about the Model 3, for a 48kWh battery pack, that only leads to a US$2800 price difference between the Model 3 with the Gigafactory and the Model 3 without the Gigafactory.

Our analysis [in the report] was, does that matter that much? Elon talks about demand not necessarily being a limiting factor. Well how inelastic or elastic is the demand for a Model 3 and is US$2800 going to move the needle? To a certain degree it will but it’s probably not as needed as much as we talk about when we talk about cost reduction.

The component that’s most important for the Gigafactory as to why it’s needed, is the supply chain. How fast can they get these batteries to market, how quickly can they ramp up from what their projected capacity will be? And that’s something that they’ve struggled with previously. Famously, a while ago Elon had to ship tyres on a chartered jet from Europe to California to make shipments on time. Obviously that’s something that’s incredibly costly and they’ve had to work with their supply chain tirelessly to make sure that their own supply chain matches Tesla’s production.

For the full interview, visit PV Tech Storage.

19 October 2021
This year’s EV World Congress will hold a special role, not only as the first live EverythingEV event in over a year – a chance to renew your connections and re-engage with the EV sector face to face – but also as a chance to share insight and inspiration as world starts to look towards move on post COVID towards hitting ambitious decarbonisation goals in 2030 and beyond. As ever, we will be bringing world leading organisations, cities, and technology providers to the UK to inspire EV innovators, and delve into the challenges facing the sector as the UK looks to revolutionise road transport.
20 October 2021
Utility-scale solar is evolving, shaped by higher power modules and demand for increasingly lower levelised cost of electricity (LCOE). Those trends are also changing project requirements elsewhere, with inverters capable of delivering high power density and power capacity in strong demand. In this webinar, FIMER will detail how its innovative high-power, multi-MPPT string inverter and modular conversion solution can both meet those demands and transform the utility-scale solar sector for the better.
20 October 2021
The race is on but we need to sprint… With global climate talks fast approaching and time running out to prevent the most disastrous impacts of climate change, now is the time to act. The Summit will explore the opportunities that emerge from taking action on climate change and provide a clear pathway forward for governments, citizens and companies. Taking place just 10 days before the G20 meeting in Rome, on 30-31 of October, and in the lead up to the critical COP26 meeting in Glasgow from 31 October–12 November, this event will be instrumental in influencing ambitious global action.
10 November 2021
The solar tracker market continues to mature at breakneck speed, with designs and component selections becoming ever-more complex in the pursuit of better project economics. But a more simplistic design could deliver a triple benefit of lower Capex, EPC and Opex costs. This webinar will set out the ideal single axis tracker design for utility-scale solar farms. The design leapfrogs from decades of experience, with a comprehensive understanding and attention to the three cost structures of Capex, EPC and Opx. Sun and Steel Solar has prototyped a single axis tracker designed to deliver up to US$0.03/W in real savings compared to existing single axis trackers on the market. That’s US$30 million for every gigawatt deployed.
15 November 2021
The 10th edition of the famous Metallization and Interconnection Workshop, MIW2021, will take place in the Thor Central venue in Genk, Belgium, on Monday, November 15, and Tuesday, November 16, 2021 as a face-to-face meeting. We are longing for direct exchange of knowledge and ideas after a long time. Hopefully you can be part of it! But of course, the organizors will keep an eye on the evolution of the Covid pandemic. It will be assess carefully, whether the workshop can be held without major risks or excessive restrictions. We are looking forward to exciting talks, discussions and meetings and to welcoming you in Genk!
23 November 2021
The solar, storage and EV industries in the UK are going from strength to strength. There is no better place for the community to meet, share ideas and do business than Solar & Storage Live from 23-25 November at the NEC.There’s something for everyone; more than 150 exhibitors, a high-level conference, a start up and innovation zone, a poster zone, strategic partners to network with and much more. 

Read Next

October 18, 2021
Heterojunction cell and module manufacturer Meyer Burger has appointed a new CFO just one year after incumbent Jürgen Schiffer took on the role.
October 18, 2021
Italian grid operator Terna has acquired Italian solar O&M provider LT in a €24 million (US$27.8 million) transaction.
October 18, 2021
Recent solar wafer and cell price increases from both LONGi Solar and Tongwei, which have seen prices rise by between 5.6 – 7.7%, have underscored heightened volatility in the solar supply chain.
October 18, 2021
Canadian pension investor OMERS Infrastructure has acquired a 49% interest in the Australian renewable energy platform of utility-scale solar developer Fotowatio Renewable Ventures (FRV).
October 18, 2021
US independent power producer Silicon Ranch has acquired Clearloop, a start-up that helps companies offset their carbon emissions by funding new solar projects.
PV Tech Premium
October 18, 2021
PV Tech Premium speaks with a global shipping analyst to discuss the industry's sky high prices, delays to delivers and when the situation may improve

Subscribe to Newsletter

Upcoming Events

Solar Media Events
October 19, 2021
Upcoming Webinars
November 10, 2021
8am (PST) | 5pm (CET)
Solar Media Events
December 1, 2021