At CleanTechnica, we have already written a few articles about this, but until the Q2 investor call, it was just a theory. In fact, even some of my colleagues considered it bullish and so in some ways I consider this to be my theory and am extremely stoked that Elon confirmed it and that this will actually happen. My writing on this started in 2018 with the article “The Future We Need — From The Tesla Gigafactory To A Chain Of Terafactories.”
All of this is based on a very simple premise and calculations that are basic high school math. The question is, how many batteries does the world need for a sustainable future? Here is a very short recap: no matter how unambiguously low you make the numbers, like by replacing yearly car production (~75 million gas/diesel cars) with mere 60 kWh battery-powered EVs, you would still need either 45 Gigafactory 1 (GF1) style factories (~100 GWh each) or 90 Gigafactory 3 (GF3) style factories (~50 GWh each), and none of that includes home, grid, or industrial battery storage the world needs — pretty crazy. What this means is that the Nevada Gigafactory, which produces more batteries per year than the world combined did in 2014, will be a laughing stock compared to what we need and will hopefully have in the next few decades. Like I said, though, this is simple high school math.
The news, however, is that Elon confirmed my theory in the Q2 investor call. Please have a listen to the short excerpt from the call that we livestreamed around the 1 hour mark. The relevant part ends at around 1:03:30.
Here is a text-based version of what is said:
Elon: To some degree, Battery Day will be kind of like a Master Plan Part 3. Which is like, okay, how do we get in the tens of gigawatt-hours per year to multiple terawatt-hours per year. That’s a pretty giant scale increase. That’s like increase by roughly 100. If we’re like at 28 gigawatt-hours right now — well, actually, there’s more than that if you count the factories in Japan. So, call it like a little over 30, 35 or something like that. How do we get to like 2 terawatt-hours a year … so, two order of magnitude increase?
Zachary Kirkhorn (CFO): That’s the way you have to think about it, because that’s what we need to do.
Elon: In order to really make a fundamental shift in the world’s energy usage and really transform things to a sustainable energy future, if you’re not in the terawatt-hour range, it’s like — it’s a nice news story but it’s not fundamentally changing the energy equation.
This echoes what I wrote in my last article:
“So, let’s not get too judgmental over the fact that we might not all get to own a Tesla. Perhaps there is a good, justified reason for this. That is not a bleak future — it’s just so bright you can’t even see it yet. Nonetheless, Elon, it’s time to hear Master Plan Part 3. What really comes once we have full self-driving vehicles? Where will the company go? Towards Model Omega and batches of gigafactories as laid out in this article? Towards Mars? Towards electric planes? Dealing with climate change and prevention of further climate catastrophe? Right now there are more questions than answers.”
It looks like at least one answer is batches of gigafactories.
For anyone who wasn’t sure, 2 TWh equals 2,000 GWh or 2 billion kWh. This in turn equals ~20 GF1 factories or about ~40 GF3 factories and can produce between 20 million 100 kWh cars or a bit more than 33 million lower-range 60 kWh cars.
What does Battery Day have in store for us?
It is pretty much confirmed that something like Tesla Master Plan Part 3 will be unveiled on Battery Day. There will likely be multiple battery product announcements as well, because the ability to churn out gigafactories will be made up of a convergence of multiple technological improvements to the end product as well as “the machine that builds the machine.”
On one investor call a while back, Elon dropped a bomb on the press by claiming that due to improvements in manufacturing technology and factory layout, GF1 would have enough room to produce not 35 GWh but 105 GWh of car batteries. This was years ago. Everyone who thinks they have been sitting still since then and not improving on those numbers, raise your hand. *sound of crickets follows*
Expect a similar kind of announcement at Battery Day. The GWh production equation (not to be confused with the equation for how many GWh the world needs) is much trickier. Below are some of the improvements Tesla will likely unveil.
Maxwell Part 1 — Energy Density
First of all, an improvement in technology can mean that the same raw materials going into the factory on one side on the other end can result in a battery that can hold more energy, something called battery energy density. This has surely been improved as well.
Maxwell Part 2 — Manufacturing Speed
Elon said that the Gigafactory is producing batteries faster than a machine gun fires bullets. That’s cool, but the speed at which the machine works has surely been improved and part of that is where Maxwell comes into play. The dry battery electrode means that batteries can be made more quickly or at the very least take less room, because a large buffer area is no longer needed.
Batteries that last longer
We for sure know that Tesla plans to make something it calls the million-mile drivetrain. This will in part be done by having larger batteries that have a larger safety buffer, so that 0% left actually means 20% left and 100% actually means 80% (or something like that) — keeping a battery charged between 20% and 80% prevents degradation and thus extends its longevity. Tesla can also improve the charging cycle count on a chemical level and perhaps in other unforeseen ways.
While not as crucial to the mission, we finally also have batteries that will charge faster. Tesla V3 Superchargers can achieve 250 kW charging. However, as every Tesla owner knows, Superchargers don’t maintain that maximum charging rate throughout the recharging process, and that number slowly falls as the battery fills up. And if you want to charge that last 10% for a long road trip, the charging rate will be reduced to a very slow crawl.
So, how is Tesla going to get to 2 TWh of annual production in Master Plan Part 3?
Hopefully every GF3-style factory (which has half the targeted production capacity of Nevada’s GF1) will be able to double its GWh count to match its bigger brother. Tesla has a strategy for how to best approach difficult tasks, and that is by improving efficiency. The most important efficiency advantage of the Model 3 that the team spent a lot of effort on was aerodynamics. Even today, the Model 3 is the most aerodynamic production car in existence. While it was hard work to get the car that aerodynamic, it’s basically like scoring easy points since it makes a 60 kWh battery sufficient rather than requiring an 80 kWh or even 100 kWh battery. In other words, the pattern to look for is a simple but out-of-the-box solution that can be at least be widely/frequently used and at best can be improved upon over time.
When you look at GF1, one of Tesla’s biggest problems is recruiting enough people. A factory too large (esp. far from a big manufacturing workforce) will run into such problems. Having too many factories will run into very high costs, on the other hand, since you miss out on some economies of scale. If GF3 strikes the right balance, it could have the best of both.
Elon likes to use the phrase “the machine that builds the machine.” Tesla acquired Grohmann Automation in Germany to focus on this task. Unfortunately, Tesla is not very open about what success stories is has achieved on the backs of engineers at Grohmann Automation, other than what we get from leaks and speculation and the occasional official mention by Tesla. We know for sure that 3 Grohmann machines made the production of 8,000 Model 3 battery packs per week at GF1 possible. In addition to that, recent patents so unbelievably futuristic — like the unibody molding machine Tesla recently patented (in image above) — also quite likely came to some degree at least from Grohmann. But how much progress has Tesla made on creating a better “machine that builds the machine?”
When can Tesla hope to achieve 2 TWh of annual production capacity?
This is where our recent article about Tesla’s Full Self-Driving strategy comes into play. To reach 2 terawatt-hours, Tesla would likely need between 20 to 40 gigafactories, depending on the type and their GWh output. As Elon once said in an interview, to provide for the entire world, we would need around 100 GF1-type gigafactories (or 200 GF3-type gigafactories). To get this show on the road, Tesla will benefit from a lot of self-funding. For that, Tesla will have to start selling full self-driving robotaxis for a much more expensive price, as Elon recently explained in this robotaxi tweetstorm we digested.
If we make all cars with FSD package self-driving, as planned, any such Tesla should be worth $100k to $200k, as utility increases from ~12 hours/week to ~60 hours/week
— Elon Musk (@elonmusk) July 16, 2019
In any case, this is likely the reason why Battery Day is slated for next year, after Tesla has proven that all of its statements about being able to make FSD a reality are more than just talk and powerpoint slides displaying some really slick bits of silicon come to life for consumers.
If you listen to the Q2 call, this topic really, really excites Elon. At the shareholder meeting a few months earlier, Elon also wanted to “let the cat out of the bag” on batteries — you could see his colleagues on stage nearly suffering a stroke when Elon suggested that. For anyone who wasn’t quite sure what that was about, let me explain my reading of it. This plan is so ambitious, so difficult, so dependent on trust and backing of investors, shareholders, and the media that releasing such news early — when the company hasn’t yet proven itself beyond a shadow of a doubt — could result in a lot of bad things for the company, like a huge drop in stock price, the SEC accusing the company of lying, a media shitstorm, or all of the above and more. Sometimes it is better to hold back on grand visions to make sure others are ready for them.
While the following is one of the last aspects of our Master Plan Part 3 theory that Elon has not yet confirmed, we believe that Tesla is going to start building factories in batches. A lot of people thought mass producing satellites was still fairly distant science fiction, until it turned out that SpaceX already started doing that this year with Starlink. Manufacturing factories in batches is really the only way Tesla can pull this off. In any case, if you crunch the numbers, without any major technological breakthroughs, by selling expensive robotaxis, Tesla could achieve its Master Plan Part 3 goal of 2 TWh of annual production capacity by 2030 and fund the gigafactories needed for that by 2025. Without more details, this is difficult to calculate. Although, it would not surprise us if Tesla could achieve it all sooner than that. For more information on the topic, please read our “Tesla’s Full Self-Driving Future & What That Could Mean In Some Wild Scenarios” article and see our spreadsheet that lets you simulate different potential futures for Gigafactory expansion.
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