Tesla Announces New $5 Billion Battery "Gigafactory"

Tesla Building

By Justin Bull

March 6, 2014

Tesla Motors has announced plans to invest up to $5 billion in a new battery factory. The goal is to produce low-cost batteries that will let Tesla bring cheaper electric vehicles (EVs) to market.

Tesla has enjoyed remarkable success with its Model S sedan, which starts at $70,000: Consumer Reports recently rated the car the top overall pick for 2014. But battery shortages have constrained sales. The company’s cofounder, Elon Musk, hopes to produce a mass-market electric vehicle – the Model E – but will need more affordable batteries to do so.

The company is looking at four US states – Nevada, Arizona, New Mexico and Texas – as potential locations. The factory is expected to create 6,500 jobs, and will run entirely off solar and wind energy.

The goal is to reduce the cost per KwH by 30% in the first year of production, with further price reductions as the factory expands. The factory will work to support Tesla’s goal of producing 500,000 EVs per year by 2020.

Each Tesla EV has thousands of lithium-ion batteries connected inside its battery packs. The new factory, dubbed the “Gigafactory,” will require 10 million square feet of space to produce all the batteries required. 

Musk also happens to be the chairman and a major shareholder of Solar City, a residential solar provider. Solar City has enjoyed explosive growth of its lease-based solar panel systems, and is now offering home energy storage systems as well.

Bringing down battery prices is a major component in the shift towards a low-carbon economy. Renewable energy, such as wind and solar, needs to be stored so the grid can provide a steady and reliable flow of power. Tesla’s ambitious new factory could potentially reshape the EV market, as well as secure a future for home energy storage systems.