Published on June 7th, 2017 | by Kyle Field0
Tesla To Build 10–20 Gigafactories Around The World As It Scales Up (#ElonTalks)
June 7th, 2017 by Kyle Field
The 2017 Annual Tesla Shareholder Meeting on June 6th blew the lid off of new updates on Model 3, Model Y, and Tesla Semi, while also providing updates on more mundane business matters. One massive update was about the number of Gigafactories Tesla is planning around the world. CEO Elon Musk shared that it is planning for at least 10 Gigafactories, but could build as many as 20.
The variance in his estimate is based on how other manufacturers respond to the challenge Tesla has thrown down. Let’s wind the tape back for a minute. Elon noted in the past that the world would need approximately 100 Gigafactories to produce all of the energy storage and electric vehicles it would need. His announcement today that Tesla would build 10 Gigafactories implies that it will own 10% of the world’s future energy storage and electric vehicle capacity.
Assuming Tesla can sell its cars, the full manufacturing capacity of those Gigafactories will come straight out of the market share of existing automotive companies. If they do not respond to the inevitable shift of consumers to electric vehicles in time, Tesla will have more time to eat up their market share. That clearly includes the market share of BMW, Audi, Mercedes, and Lexus, among others. Tesla estimating that it will build 10 to 20 Gigafactories is a statement that Tesla believes it will have to build at least 10 Gigafactories at the current pace before other manufacturers catch up. If they respond slower, which seems to be the case with every automotive manufacturer today with the exception of perhaps Chevrolet and its Bolt, Tesla would have an even larger head start in the transition to electric vehicles and would be able to build more factories before there were enough competition to saturate the market.
Diving into work currently underway for batteries, Elon shared that Gigafactory 1 is on track and will be able to produce more lithium-ion batteries than the rest of the world combined when it is at full capacity. This includes the capacity of all other EV manufacturers and clearly puts Tesla on top as having the highest capacity to produce the batteries required for serious volumes of EV production.
Said another way, even if another major automotive player wanted to roll into EVs with billions of dollars to work with, it would be constrained by the number of available batteries to purchase from all current sources. Tesla’s foresight to build battery capacity in advance of the demand was and continues to be a massive competitive advantage for the foreseeable future.
“We are maximizing economies of scale to get the lowest cost batteries possible.”
Tesla is pushing to have the most advanced batteries possible at the lowest cost. From his perspective, Elon shared that no one out there is close to doing the same thing because of the massive advantage in scale Tesla has and because of the advancements in battery technology Tesla has made with its battery (and now solar) partnership with Panasonic.
“There’s just no one else even attempting anything on this scale. That puts us in a very strong competitive position to sustain the company over the years to come.”
“[The Gigafactory is] like a giant machine” that Tesla will continue to refine and optimize as it scales operations globally.
He also spent a good deal of time on safety. This is clearly in response to continued pressure from the United Auto Workers Union, which has been pushing workers to unionize. Elon shared that the safety rate at the Fremont factory is half that of the automotive industry globally and far better than competitive automotive factories in the US.
Tesla is moving from 2 shifts per day to 3 shifts per day to help reduce the number of safety incidents. It found that many injuries were happening at the end of shift when workers are the most tired and believes that this will help improve the safety of its workers. He stated that he is proud of the safety team at Tesla and because of their hard work, Tesla is making great progress towards being the safest manufacturing company in the world.
The Next Gigafactories
Tesla has massive plans to scale up with more Gigafactories around the world and is seriously considering 3 more locations at present. The overall plans for its rollout of Gigafactories is still being finalized. He had previously shared that Tesla would announce the location of the next 2–4 Gigafactories by the end of this year, so this statement is right in line.
Elon shared that current Tesla owners can pay to upgrade their battery. He noted that it would be expensive but that it was something Tesla was looking to more officially support. To get the most out of the initial investment, owners should wait until the life of the battery has been run down before upgrading and it would still likely to be a better option to just sell the older Tesla and to buy a new one.
Speaking of older Teslas … Elon picked the scab off what sounded like a pet peeve of his. He shared that pre-owned Teslas will be rebranded as used Teslas on the website because that’s what they are. Tesla will give the used vehicle section more prominence on the website moving forward. With a used Model S coming in at around the same price as a new Model 3, but with availability right now, it is a good option for those who don’t want to wait for the Model 3.
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