Tesla Kicks Into Gear With a Lithium-Ion "Gigafactory" in the Desert

Tesla Motors

By Arman Kazemi

September 11, 2014

In a move that could usher in a new era for electric vehicles, Tesla Motors confirmed longstanding rumours when it announced last week that Nevada would be the home for the company's first lithium-ion “gigafactory.”

The facility aims to overcome the biggest hurdle facing Tesla: sheer lack of batteries. Tesla's predicted 35,000 car deliveries in 2014 isn’t limited by a lack of demand, but by the cost and availability of the lithium-ion packs that power its cars.

The factory is expected to cost upwards of $5 billion. Nevada beat other states in the bidding, including California, Arizona and Texas, by offering up one of the better incentive packages, amounting to about $1.2 billion in tax abatements over 20 years.

According to The Motley Fool, the entire world's lithium-ion production cannot supply Tesla with sufficient batteries to produce a mass-market electric vehicle, one of Tesla’s primary goals since it went public in 2010.

Earlier this summer Tesla entered a partnership with the Japanese electronics manufacturer and its primary lithium-ion supplier, Panasonic, to help build the gigafactory and to take the manufacture of lithium-ion into its own hands.

Panasonic will occupy half of the planned manufacturing site, a plot of industrial land nine miles east of Reno. Tesla’s other suppliers and its own module and assembly operations will take up the balance.

Tesla will continue to build its cars, including the vaunted Model 3, at its plant in Fremont, California.

The scale of the operation is also expected to trim production and manufacturing costs of the batteries, which account for the majority of EVs’ price deficit with traditional combustion engines.

By 2017, when the gigafactory kicks into operation, Tesla expects the cost of manufacturing the batteries to drop by a third. That could push the lithium-ion battery into what Clean Technica calls the “holy grail of EV battery pack costs,” at $100 per kilowatt hour.

This is the industry’s gold standard for “the point at which EVs will be undeniably cost-competitive with gas-powered vehicles,” the report states.

With this projection, Tesla estimates that it will be in a position to manufacture enough lithium-ion batteries to supply 500,000 vehicles a year by 2020. That would lay the groundwork for a truly mass-market electric car, potentially altering our transportation future.