The Tesla Gigafactory is a technological marvel, is largely a mystery, and also happens to be the world’s biggest battery manufacturing facility. This article was originally going to be about the financing “freeze” and what might actually be going on, but now it will also straighten out some new Panasonic lithium waste that just hit the fan.
Most people see the Gigafactory as one whole factory operated by Tesla and Panasonic to manufacture batteries with a new chemistry that was jointly developed by the two. All of that sounds very harmonious, but in reality, it really isn’t.
Panasonic is responsible for creating the battery cell, while Tesla is responsible for making the battery pack. These are in fact two very separate operations. Most Tesla employees have never seen the Panasonic side of the factory and most Panasonic employees have never seen the Tesla side of the factory. Imagine it like a takeout restaurant — the kitchen makes and packs the food, opens a hatch, pushes it through, and closes it again. Only, instead of food, we have batteries.
When we hear crazy stories about Elon sleeping in the factory, or stories of Elon getting his hands dirty working on some machine in the factory, it may very well be that this is only on Tesla’s side of the factory.
Incorrect. Pana cell lines at Giga are only at ~24GWh/yr & have been a constraint on Model 3 output since July. No choice but to use other suppliers for Powerwall/Powerpack cells. Tesla won’t spend money on more capacity until existing lines get closer to 35GWh theoretical.
— Elon Musk (@elonmusk) April 13, 2019
Missing Its Targets
At the end of August 2018, the Gigafactory reached 20 GWh/year output. This in itself is quite an achievement. Emboldened by it, Tesla decreed that it would hit the factory’s original output of 35 GWh by the end of the year. However, we found out that as of right now (April 2019), Gigafactory output has only reached ~24 GWh. This means that that, within the last 7–9 months, the Gigafactory has only gone from 19% complete (20 GWh) to 23% complete (24 GWh) rather than reaching 33% complete (35 GWh).
When we take into account when the factory was built and when it reached other milestones, what this translates into is not an exponential progress equation but rather a linear equation, and a slowing one at that. A word of caution, though, any line will look different depending on the scales used, and wild fluctuations can always cancel each other out in the longer term.
Panasonic’s Hopes, Failures, & Pleas
Panasonic is one of the best and biggest battery manufacturers in the world. Nonetheless, it is extremely lucky to have gotten its current arrangement with Tesla, which craves and is willing to invest in batteries beyond your wildest corporate dreams. Presumably, this means that Panasonic will go to great lengths to maintain its relationship with Tesla.
As was made clear in recent news, Panasonic’s side of the factory has been a bit of a mess. From that same news, we heard some disturbing but unconfirmed rumors that employees made mistakes there and are afraid to speak up. Yet again, this shows how different Tesla’s and Panasonic’s management strategies are. At Tesla, as we know from first-hand experience at the Fremont factory, the workers are pushed to not fear failures. Rather, they are discouraged from a lack of trying or saying the “forbidden words,” which are “that’s impossible.”
To us westerners, the Japanese culture can sometimes seem strict, which quite likely also translates at least in some fashion to Japanese facilities abroad. Otherwise, they’d risk looking pretty bad on audits. It must seem like quite a dilemma for Panasonic. From one side, the team there is expected by Tesla to rapidly increase its output (but they are unable to meet their goals). The result of such pressure? Probably more mistakes, lots of fear, and the things we have seen in the news recently about the Gigafactory, as well as other consequences.
Another desperate solution Panasonic had for solving the problem was throwing more money at the problem. In July and again in October, the Gigafactory was in the news spotlight when Panasonic commented on its willingness to commit additional investments to the Gigafactory. These investments were supposedly for growth beyond 35 GWh, but when we look at the current situation, it’s probably a bit more complex than that.
Additional lines will help reach the 35 GWh short-term goal, and in the long term, when the S-curve is ramped, could help go beyond 35 GWh. Tesla, however, was probably more worried about facing the same issue at a later date, once a lot more money was invested. Elon must be very frustrated by this since he can’t just use his usual mad engineering skills and tactics to go wild and experiment on Panasonic’s lines to help them ramp.
The story of Tesla buying Maxwell is extremely complicated. Long story short, it seems Maxwell was not doing so well but had upcoming technology that could change its financial predicament. Although this new technology would probably not come in time to save the company, investors were probably in denial about that. Maxwell wanted to sell the promise of future technology for a huge sum that Tesla didn’t feel like forking over. Word is Maxwell desperately tried to contact everyone in the industry to see if someone would offer more or place any bid at all to see if the investors could squeeze more out of Tesla. That is most likely when Panasonic got word of Tesla’s intention to buy a “battery component manufacturer.” Panasonic, knowing how much Tesla loves vertical integration, probably feared that Tesla was about to cheat on their currently exclusive relationship.
So, when Toyota came knocking, finally looking for a battery supplier, Panasonic, probably at its most vulnerable moment, felt like it could definitely use a new partner in case Tesla decided to do some more vertical integration. The timing of all of this is very suspect — the Toyota–Panasonic partnership was announced exactly two weeks prior to Tesla announcing its intent to buy Maxwell. Although, to be fair Toyota and Panasonic, they had already been flirting since at least 2017, and Toyota is interested in prismatic cell batteries rather than cylindrical ones.
The Ever-Changing Blueprints of the Gigafactory
Tesla is also in quite a predicament. On one hand, it has Panasonic struggling to meet its goals at the Gigafactory. On another hand, it doesn’t want to upset China by bringing Panasonic to GF3. On a third hand (just go with it), Maxwell’s technology might significantly improve Tesla’s batteries without having to wait or invest in the solid-state battery epiphany that a lot of car manufacturers are holding their breath for.
We know for a fact from multiple sources, including a company spokesperson, that the Gigafactory is completely packed. There’s no more room for anything without expanding the structure. The Model Y is supposed to be built there, perhaps other models, like the Roadster and Semi, as well. Tesla, however, has not yet broken ground to expand the exterior structure. This has puzzled a lot of people for quite a while. From what we can gather, Tesla itself doesn’t know when it will expand the structure. While there is no official reason for this, there is a theory that would explain quite a lot.
Tesla loves efficiency, so building the factory and then having to rebuild it due to changing plans is not something it would find acceptable. Right now, there are at least two sets of GF1 blueprints, maybe more. One set of blueprints has Maxwell dry-cell technology that might take more or less space, and one set doesn’t have that tech. The Maxwell option is probably not even a blueprint yet, just the understanding that the current blueprint would have to be updated.
Another matter is Panasonic’s inability to ramp production. Theoretically, Panasonic should be able to hit 35 GWh, but if it can’t or this takes much longer than planned, Tesla may have to consider changing the building blueprints to accommodate additional lines to meet long-term goals.
The mysterious financial freezes are just further confirmation of something strange going on, which quite possibly relates to a huge distrust issue. The bottom-line issue seems to be that more output is needed from existing equipment. With Panasonic as the reported bottleneck (according to Elon Musk), there’s no point in Tesla investing more at the moment, and it seems Panasonic is intent on getting more out of the current equipment before investing more, but calling it a financing freeze sounds controversial or even combative.
And it seems Panasonic was previously intent on investing in more lines to achieve 35 GWh, yet for some reason now prefers to first get more out of the current equipment. It’s just unclear what triggered that change — or if the money was invested but without reaping the expected fruits.
What’s Elon Up To?
One very big question remained when contemplating the lack of progress the Gigafactory has shown. Where is Elon currently focusing his attention? Autopilot? Fremont? Is he helping ramp the Gigafactory S-curve? Did he switch his focus to SpaceX now that the company is no longer drowning in production hell lava? Could he in fact have bought “Battery Manufacturing for Dummies” volumes 1 to 600 and be absorbing new knowledge to help him vertically integrate battery production? Who knows, but a very important unanswered question is: on the couch (or under the desk) of which facility is Elon spending his nights right now?
The Gigafactory 3 Shanghai Wild Card
One area teeming with activity, however, is GF3 in Shanghai, China. Gigafactory 3 will have its own battery production and could help pick up the slack for GF1 in Nevada. While we have now seen a preview of what GF3 will look like (during the Model Y event), we have yet to get any numbers from Tesla on its plans for battery production. We also have yet to get more solid information on who is going to manufacture the batteries at GF3.
What GF1 Woes Today Mean for Tesla’s Future & Mission
In short, Tesla’s ability to ramp battery production at Gigafactory 1 in Nevada directly affects the success of its mission. How quickly Tesla can reach 35 GWh (and 150 GWh) of battery production could ultimately indicate the maximum speed at which Tesla could potentially grow in the next 5 to 10 years and could determine how hard the competition will have to work to remain relevant in the industry.
Extrapolating battery production growth from previous statements, and using an exponential growth curve, we had an estimate of 150 GWh of production capacity by 2021. With the recently revealed Gigafactory 1 hiccups, that growth progression changes a lot and the 2021 figure should be much lower. When will Tesla actually get to 150 GWh? We need to wait for more information before updating again. But the implications are clear — this influences how quickly Tesla can scale production under its previous plans (not procuring batteries from other companies).
Postponing the 150 GWh goal will not deal a serious blow to Tesla financially. It is still making money on the hundreds of thousands of cars it’s producing. However, without Tesla boldly leading the way, it could mean a huge blow to the urgency for progress in auto and battery industries, and could have dire consequences on Tesla’s mission and climate change.
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