11 Key Tesla Gigafactory, Model 3, Solar, & Elon Romance Takeaways From Today’s Statements

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The Gigafactory is open for business, and that business is world domination (of the car and stationary storage markets). Of course, that’s assuming all goes dandy in Gigatown, but there’s a lot of reason to believe it will.

Below are 11 key takeaways from the Gigafactory opening, with special thanks to Teslarati  (x 2) and Fortune for scooping the quotes up. Naturally, I add my own commentary and thoughts alongside the quotations below.

1. Yes, the Gigafactory is a product.

I focused on this first and foremost when writing about Tesla Master Plan 2, and I still think it’s the most important factor in Tesla’s future success as well as the most exciting to Elon. The following quote backs that up again:

“The factory itself is considered to be a product. The factory is the machine that builds the machine. It actually deserves more attention from creative and problem solving engineers than the product it makes. What we’re seeing, if we take a creative engineer and apply them to designing the machine that makes the machine, they can make 5 times as much headway per hour, than if they work on the product itself.”

2. NOW, Tesla has a battery cell optimized for electric cars.

Tesla optimized conventional 18650 battery cells for the Model S and Model X (they are not your normal laptop batteries). But they still weren’t ideal for electric cars. We’ve long known that the Gigafactory will produce battery cells a bit bigger (note that they are still being produced in partnership with Panasonic), but Elon and JB added some statements on that.

JB: “We’ve spent a lot of time on this actually. It’s kind of interesting. There are a bunch of tradeoffs. There are some things that get better when you make the cell size bigger, and some things that get worse. 18650 was sort of an accident of history. That was what was standardized for early products. So we revisited all of those tradeoffs and came to this size, which is quite a bit bigger. If you have them next to each other, the actual volume of materials inside is substantially more. And overall it’s about cost optimization.”

Elon: “It really comes from the first principles of physics and economics. That’s the way we try to analyze everything. To say like if no cell existed in the world, what size should it be? What is the size that would achieve the product characteristics we’re looking for, but would be fundamentally optimal? 18650 is not optimal.”

3. Panasonic DID think the Gigafactory was a crazy idea.

We take the Gigafactory for granted a bit now, but when the Gigafactory was first announced, it shocked the world. It was (and is) a ginormous project to complete critical parts of the EV ecosystem puzzle (getting battery costs down and production up to an adequate output). But it was so ginormous and beyond what most people expected possible that there was skepticism around Panasonic’s commitment to the project. Well, Panasonic executive vice president Yoshihiko Yamada basically confirmed that Panasonic wasn’t 100% sold on the idea initially:

“Three years ago I thought this gigantic Gigafactory idea was crazy. Because then the production of the factory would exceed production of the industry. I thought it was a crazy idea. But I was crazy, and I was wrong after seeing extreme success of the announcement of the Model 3 and the strong demand.”

That’s quite a humble revelation.

4. Tesla really did jack up the expected productivity/output of the Gigafactory … without moving a wall.

Well, I don’t know for sure about the wall statement — Tesla probably did move some walls, but the important thing is that Tesla really did massively increase the projected output of the Gigafactory without expanding the volume of the building. Elon:

“What you’re seeing is only 14% of the size of the factory overall. It’s quite huge. One of the things we discovered as we got more into the Gigafactory design and optimizing what it could do, we thought we could probably achieve about three times the output that was originally planned.

“So we originally expected to make about 35 gigawatt hours at the cell level and about 50 gigawatt hours at the module or pack level. Now we are expecting to do about 150 gigawatt hours in the same volumetric space as the original design. We can expect to see 10,000 [workers], compared to the 5,000 or 6,000 previous estimate. Maybe in three to four years.

“Things are on track to be able to meet the Model 3 plan next year. We’re really excited about what’s happening here.”

5. The Panasonic–Tesla relationship is a very close one.

Again, we’ve gotten strong hints of this several times in the past year or so, but it was emphasized more clearly by Panasonic executive vice president Yoshihiko Yamada at the Gigafactory opening: The Panasonic–Tesla relationship is a close and unique one. It seems to be something they are navigating or evolving as they go. Here are his exact words:

“I want to explain to you the relationship with Tesla and Panasonic. I used to be in charge of components five or six years ago. At that time our relationship with Tesla was one of supplier and customer. A conventional business relationship.“But since we started discussion on the Gigafactory that’s completely changed. One example, is production capacity is now two or three times more. Why? Because Tesla and manufacturing people worked together. We are discussing these details. This type of relationship is quite new for business. We are not the simple buyer and supplier relationship.”

6. Financing for Tesla Model 3 production ramp will be built on the backs of Model S & Model X, with a bit of a capital raise on top.

It’s often hard to tell if people are deceitful, manipulating TSLA bears/shorts or simply fearful when they act like ramping up Model 3 production is an impossible task. Part of that is the idea that Tesla can’t afford to ramp up production quickly and will have to do a massive capital raise in order to achieve the targets. Elon essentially told such people to hush up and calm down on this matter:

“One part of that is working with strategic partners like Panasonic. We are seeing very good participation from our supplier for the capital costs of the Model 3 ramp. So we are going to fund it by Model S and Model X revenue, with money we have right now, with potentially a modest capital raise, but not a significant one. In a nutshell, there may be a capital raise, but it’s not going to be a huge one.”

7. Tesla Model 3 production schedule the same as before, but that S curve is a tricky one to predict.

One of the annoying things about reporting on the Tesla Model X production ramp (and being a TSLA investor during it!) is that the quick ramp kept getting interrupted and delayed. Shit happens (quite a lot with perhaps the most complicated production car on the planet) and the exact timing for a ramp in production on a new vehicle is hard to accurately predict (ahem, guess) ahead of time. The Tesla Model 3 “should” have smoother sailing on that front, but it’s still a wild card. Elon and JB talked about this yet again today.

Elon: “I believe we are on track to meet the half million by 2018. The hardest thing to predict is really the ramp. The ramp looks like an S curve and grows exponentially. Initially the ramp looks really tiny and as you eliminate bottle necks you climb the ramp and you level off. Its always difficult for us to forecast the exact shape of the S curve for the production ramp.“It’s much easier for us to forecast when things are going to be steady state. So we’ve been pretty good about forecasting 2018, whereas 2017 is much more in the air because we’ll be working through a complex production ramp.”

JB: “One of the points is the schedule and ramp up plan for the Gigafactory. With the pull up of the Model 3, and the volume goal to meet a half million cars by 2018, we also have had to pull up the Gigafactory schedule to supply the cells and battery packs for the Model 3.

“What that means is for the earlier schedule for the Gigafactory, we’ve had to pull that ahead by two years. By 2018 we have to be at 35 gigawatt hours of production to support those Model 3s. You can see the evidence of that around the factory. And Panasonic has done their part to absolutely stay in sync with that as we’ve accelerated the schedule for Model 3.”

8. Elon supports net metering up to 20% solar penetration.

Elon’s a learner, and I’m not sure where he finds the time, but he has learned key facts about penetration of solar on the grid that many a grid expert would back up. Talking about the absurd case of the Nevada PUC cutting net metering (and this pushing SolarCity out of the state), Elon talks about solar like the CEO of German grid operator of 50 Hertz would:

“Solar power production actually helps the grid to a certain point. Only past a certain point does it create issues with the grid. A utility can handle up to 20% of production from solar and that helps the grid because it produces electricity when needed. Solar power peaks in the middle of the day and that’s also when air conditioning is running and businesses are operating, so power production matches usage.“But once you exceed the 20% level, then it does become more difficult for utilities to power balance the grid. So I think it makes sense for net metering to be there up through the point where it helps the cost structure of the grid. That’s the logical thing. The utilities in some cases have tried to obfuscate that its actually helpful, and have tried to lower that number of 20% to like 3%.”

By the way, tagging onto that, Elon actually admitted that Tesla might get into grid services at some point:

“I think we’ll get into grid services eventually. The goal of Tesla is to accelerate sustainable energy, so we’re going to take a step back and think about what’s most likely to achieve that goal.”

9. Stationary storage will be a humongous market for Tesla.

Yet again, this basically restates what we’ve heard before, but it is worth repeating:

“Stationary storage will be as big as the car business long term. The growth rate will probably be several times what it is for the car business. We roughly assume that it’ll be probably a third of our output. But the growth rate is faster, so then grow to probably match what it is for cars.”

10. Autopilot is a big boost to driver safety.

The calls for Tesla to turn off Autopilot following the 1st death with Autopilot on have been something we’ve ignored since they seem so nonsensical, but Elon keeps getting asked about the topic. His response today was essentially the same as before, but he also threw in an interesting stat (which is actually the only reason I’m including this and screwing up my “top 10” list):

Elon: “No, I think we did the right thing. I think we improved people’s safety, not just in fatalities but also injuries. We can see how it actually reduces impact velocity. It can reduce impact from 76 miles per hour to 46 miles an hour. That’s massive.“We polled Tesla owners, do you want autopilot disabled or not. Not one person wanted it disabled. That’s pretty telling.”

11. Elon is a romantic … especially for machines that make machines.

Well, I don’t think many people saw this one coming. One of Elon’s wonderful communication tendencies is to allude to popular movies, books, video games, etc. He likes stories, and he likes telling people stories. But his thoughts on the Gigafactory are so romantic that they even surprise me (in a good way):

“It may sound a little strange and sentimental but I find it to be quite romantic. The final shape will be a diamond, aligned on true north, I like that. It seems incredibly romantic. By the way there’s 10,000 wild horses in the area. They just hang out. We have construction ponds for water, so its quite cool to see the horses drink from the construction ponds.”

Fun stuff, eh?

Your thoughts?

Photo by Steve Jurvetson (CC BY 2.0 license)