Phase 2 Of Tesla Gigafactory 3 Will House Battery Manufacturing Facility

According to a report by China’s Global Times, Tesla has completed construction of the parts of its Gigafactory 3 in Shanghai that will be dedicated to producing automobiles. Now it has begun work on “phase 2” of the factory, which will house a battery manufacturing facility. The report does not make clear whether this space will be used to make battery packs from cells sourced from outside suppliers or whether it is intended for cell production as well.

Last summer, Tesla announced it would use battery cells sourced from LG Chem for the battery packs used in the Model 3 sedans built in Shanghai. It also indicated it was open to using battery cells made by CATL or Panasonic in the future as well. The implication is the company does not intend to manufacture its own battery cells but will be responsible for making its own battery packs, presumably in the part of the new factory that is now under construction. Global Times visited the Gigafactory 3 (GF3) site this week and reports the area where phase two will be located has already been paved and the installation of pillars and roof trusses has already begun.

Feng Shiming, a veteran analyst for the Chinese auto industry analyst, tells the Global Times he has heard from Tesla employees at GF3 that the first batch of vehicle batteries for the Model 3 will be fully assembled as of October 30. He predicts that mass production at the Shanghai factory will not start until after the Spring Festival holidays in January next year. The factory built in the first phase will merely assemble parts shipped from the US, Feng says. On Monday, a Tesla sales person told the Global Times on Monday that a Chinese customer who places an order for a Model 3 today will take delivery of the car in 6 to 10 months.

We’ve also seen a report that Model 3 production will now start in GF3 on October 20.

A Need For Urgency

Feng suggests the push to get the Model 3 into production at the new Shanghai factory is tied in with a desire to reassure investors that the company can achieve profitability and deliver its cars in a timely fashion. “The price of the Model 3 is relatively low, so Tesla needs to start sales in China as quickly as it can and sell the car in large volumes to recoup its capital investment,” Feng says.

Some industry observers believe mainstream customers for the lower cost Model 3 may be less inclined to overlook quality concerns than the more affluent buyers of the Model S and Model X who are focused primarily on the advanced technology Tesla brings to the table. Model 3 buyers, on the other hand, are replacing conventional cars with internal combustion engines and are more interested in utility than technology, presumably.

Feng suggests Tesla may have to offer incentives to get Chinese customers to make the switch, which could depress earnings, at least to start with. Confirmed Tesla supporters, like those who read CleanTechnica, see things differently. We tend to think that once Chinese customers get to experience the goodness of the Model 3, it will be traditional manufacturers who will be juicing their sales incentives in an effort to convince shoppers not to buy every Model 3 Tesla can weld, screw, and glue together at its Shanghai factory.

Hat tip to Teslarati.