Tag Archives: Gigafactory
Fresh off hitting an elusive production target for the Model 3 electric sedan – and a weekend offer to help rescue the young soccer players trapped in a Thai cave – Tesla CEO Elon Musk popped up in Shanghai to unveil plans for his long-held goal of a massive Chinese plant. What wasn’t mentioned was how Tesla will cover the facility’s multi-billion dollar price tag.
Dubbed Gigafactory 3 the project envisioned for the Shanghai Lingang industrial zone will be able to build 500,000 electric Teslas a year, as well as all the batteries and motors they’ll need, according to a city government statement provided by Tesla. The plant, which Shanghai said would be the largest foreign-backed industrial project in its history, could also cost as much as $ 5 billion, according to Robert W. Baird & Co. equity analyst Ben Kallo.
“That’s a good starting point,” Kallo said in a Bloomberg interview. “The biggest question right now for investors, bulls and bears alike, is how are they going to pay for it?”
Never one to think small, billionaire Musk is adding the project as Tesla continues to smooth out and accelerate Model 3 production after its tortured 12-month rollout. The company is already on the hook to continue funding its original Sparks, Nevada, battery Gigafactory, also a $ 5 billion undertaking, endless modifications to its main Fremont, California, plant, development costs for the Model Y crossover, a new Roadster sports car, its heavily promoted Tesla Semi and maybe a pickup truck. Oh, and if those capital costs weren’t enough, it’s also funding a self-driving technology initiative being done entirely in-house.
“As Laozi said in the Tao Te Ching, long journeys begin with small steps,” Barclays equity analyst Brian Johnson, wrote in a research note. “And to Tesla’s credit, today’s announcement is that small step – but we also note that there will a long journey ahead (with needs for funding, plant location and construction, battery partners and supply chains) before locally made vehicles reach Chinese streets.”
Financial details of the project weren’t mentioned at a press conference in Shanghai today, and a Tesla company spokesman declined to provide a cost estimate. The facility will be wholly owned and operated in Lingang by Tesla, and conduct R&D and local sales operations as well as manufacturing, according to a statement.
“It will be a state-of-the-art vehicle factory and a role model for sustainability,” Musk said in a statement. “We hope it will be completed very soon,” without elaborating.
Establishing a production foothold in China is essential for Tesla to grow in that market and avoid its painful tariffs on imported vehicles that would otherwise make Model 3 and other Tesla vehicles unaffordable for all but a few local buyers. Chinese government support for electric vehicles has made that market one that’s too big to ignore, particularly for a company that wants to dominate global EV sales.
“Tesla’s investment will further cement China’s position as the undisputed global center for EV production,” Michael Dunne, a longtime China watcher and CEO consultancy ZoZo Go, told Forbes. Potential financial support for the factory could come from Chinese internet search powerhouse Tencent, which bought a 5% stake in Tesla in 2017, or perhaps from the Shanghai government itself, Dunne suggested.
Given the complexity of setting up a major Chinese manufacturing hub, Gigafactory 3 may not ready to go until the early 2020s, Barclays’ Johnson said, which could be a problem.
“While Tesla no doubt can enjoy some brand cachet in China as a tech innovator, which at least ensures a niche position, in the meantime local OEMs, European and US automakers are readying themselves for a speedy uptake of BEVs in China,” he said. Volkswagen, General Motors and BYD have already laid out plans for large-scale battery electric vehicle sales in China, and new players including Byton, XPeng are also readying luxury models that would potentially compete for the premium buyers Tesla targets.
Undoubtedly, Tesla will have to raise further capital to pay for the plant, Kallo told Bloomberg. Like Dunne, he also thinks a potential partner will step in to help defray some of the investment expenses, much as Tesla battery partner Panasonic at the Nevada Gigafactory.
“I’m not saying Panasonic will be the partner but you’ll see someone step in there,” he said. “We’ll hear more about that in the months ahead.”
The target for a Chinese plant to have a half million units of production capacity matches Tesla’s goal for Fremont, which it hasn’t yet attained even with the burst of Model 3 production at the end of June. First-half production at the plant that also builds Model S sedans and Model X SUVs was 87,833 units. After numerous delays, Tesla said this month it was finally building that car, nominally priced from $ 35,000, at a rate of 5,000 units per week. Musk aspires to take that level higher, but the company hopes sustained production at that volume will allow it to generate sufficient cash to fund its growing list of initiatives and, for the first time, some form of profitability.
Musk has vowed that Tesla will be in the black in this year’s third and fourth quarters, a tall order since it’s only had two, non-consecutive profitable quarters since its 2010 IPO. If the company actually achieves that, raising money for the Chinese plant should be easier.
“The access to the equity markets is there if they have growth opportunities,” Kallo said. “The important thing is the second of the year to actually show a return on this invested cap they’ve been putting in for the Model 3. Then investors will get comfortable with that and will be willing to finance other growth opportunities.”
OSAKA (Reuters) – Panasonic Corp would consider further investment in Tesla Inc’s so-called Gigafactory if requested by the U.S. electric vehicle maker, an executive at the Japanese conglomerate said on Monday.
The investment would come on top of the $ 1.6 billion Panasonic is contributing to the automotive battery plant, which it jointly operates with Tesla in the U.S. state of Nevada.
“We would of course consider additional investment if we are requested to do so,” Yoshio Ito, chief of Panasonic’s automotive business, said at a media roundtable, responding to a question about the possibility of further investment, given the chance.
Panasonic’s initial investment in the Gigafactory is almost complete, and the Japanese electronics maker has not made any decisions on whether to pledge further funds, Ito said.
The comments come after Tesla hit its target of producing 5,000 Model 3 electric sedans on Sunday morning, several hours after the midnight goal set by Chief Executive Elon Musk, two workers at the factory told Reuters.
Production of the Model 3, which began last July, has been plagued by a number of issues, including over-reliance on automation creating bottlenecks in battery production.
Meanwhile, the U.S. firm has been burning through cash as it tools up its assembly line and works on projects such as its Model Y crossover sport utility vehicle.
Its free cash flow – a metric of financial health – widened to negative $ 1 billion in its latest reporting quarter from negative $ 277 million three months prior, excluding costs of systems for its solar business.
Musk has said Tesla it will not need to seek cash in 2018 but Wall Street analysts anticipate a capital raise this year.
Panasonic is the exclusive battery cell supplier for Tesla’s current production models, making them in Japan as well as at the $ 5 billion Gigafactory.
Ito said last week at Panasonic’s general shareholders meeting that a pickup in production of the Model 3 has resulted in occasional battery cell shortages.
Reporting by Makiko Yamazaki; Additional reporting by Sayantani Ghosh; Editing by Christopher Cushing
Tesla let the press into its giant new battery-producing plant, called the Gigafactory, for the first time Friday.
Experts told Wired the factory will be necessary to power Musk’s dream fleet of EVs and hybrids (the company’s goal is 500,000 cars a year). Currently, Tesla’s battery production is outsourced to Asia, a costly and slower option. The new domestic factory, however, is expected to cut costs by 30 percent and is a one-hour plane ride away from the company’s headquarters in Palo Alto, California. The 3,200-acre plant is located in Reno, Nevada.