Tesla plans $5 billion 'gigafactory' for car batteries

28th Feb 2014 | 16:31

Tesla plans $5 billion 'gigafactory' for car batteries

Huge facility to produce 500,000 lithium packs a year, make electric cars cheaper for all

Electric car maker Tesla has announced plans for a huge new factory to produce lithium batteries.

It says the new facility will cost up to $5 billion (around £3bn / AU$5.6bn) and allow Tesla to produce up to 500,000 electric cars annually.

A site for the new plant has not been finalised but several US states including Nevada, Texas, Arizona and New Mexico are in the running. It's thought the factory will involve the full-scale product of lithium batteries from raw materials rather than operating as a mere assembly facility for modular parts.

The factory is likely a response to two major battery-related problems facing electric car manufacturers, cost and supply. Tesla says limited battery supply has constrained sales of the Model S electric sports saloon.

Of course, it's not just Tesla that's struggling with battery pricing - all electric cars currently offered by major motor manufacturers come at a significant price premium to equivalent combustion models.

Reducing costs

Production at the proposed facility is planned from 2017. Tesla says it expects first-year production to reduce its battery costs by 30 per cent with further savings thereafter. When it reaches full production in 2020, Tesla claims the 'gigafactory' will manufacture more lithium-ion batteries than are currently produced today for all uses.

The plan for the factory is timed to coincide with Tesla's plans for a more affordable model costing approximately $35,000 (around £25,000) and offering a range of 200 miles. That's roughly the same price as BMW's all-electric i3, a model with a pure-electric range of roughly 125 miles.

Tesla S

Tesla's outspoken Chief Executive, Elon Musk, has said the facility will be at least partially powered by renewable energy sources including solar and wind power. "With this facility, we feel highly confident of being able to create a compelling and affordable electric car in approximately three years," Musk said.

Exciting stuff, though it has to be said it's unusual to announce such a major project with so few details finalised. There's no firm location and Tesla hasn't finalised the partners required to fund over 50% of the cost of the project.

Then again, in the classic style of the disruptive upstart, Tesla has so far proven more agile and forward think than traditional car makers when it comes to electric vehicles. If Tesla can pull off its plans for the gigafactory, it will likely have a huge on the price of EVs everywhere. The rest of the industry will be forced to play catch up.

All of which means affordable Evs by the end of the decade suddenly look much more likely.

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