In 2015, Elon Musk announced his plans to build a Tesla (NASDAQ:TSLA) "Gigafactory," a factory producing enough batteries to store literal gigawatts of electricity annually -- 35 gigawatt-hours, to be precise, at least initially. As much as 150 GWh eventually.
By April 2019, however, those plans hit a snag when Tesla partner Panasonic pulled the brakes on plans to expand production capacity, standing pat at the 35 GWh level. (And news reports suggest actual production is even lower -- only 24 GWh.)
Now it looks like Tesla rival General Motors (NYSE:GM) is going to take advantage of Tesla's setback, and build a gigafactory of its own.
Once more, with feeling
GM shared its battery production plans on Thursday, announcing a joint venture with Korea's LG Chem to build a brand new facility in Lordstown, OH, capable of churning out "more than 30 gigawatt hours" worth of battery production annually -- nearly as much as Tesla's own Gigafactory 1 in Nevada.
As GM explained, it will take a 50% interest in the new venture, anteing up at least half the project's $2.3 billion cost, and is planning to start construction of the plant in mid-2020. Once production is under way, the new plant will first begin supplying batteries for the battery-electric trucks produced at the former GM manufacturing complex in Lordstown, sold to Lordstown Motors Corporation last month. Later production will also supply GM's "next generation of battery-electric vehicles, including an all-new battery-electric truck coming in the fall of 2021."
What it means for investors
In fact, GM says it's planning to introduce 20 or more different electric vehicle models through 2023, providing a ready market for the batteries to be produced in Lordstown.
Granted, in order to soak up 35 GWh worth of battery production, GM's new EV models must sell well. But even if demand is weaker than the company is counting on, there's the potential for GM and LG to use any excess production capacity to supply batteries to other automakers. LG is currently contracted to supply batteries to GM rivals including Volkswagen and Daimler.
Depending on the quality (and price) of the batteries that come out of Lordstown, therefore, there would appear to be the opportunity here for GM to become part-owner of a battery factory supplying a large percentage of the world's EV makers. If Tesla's own production remains constrained, that could give GM an advantage over the long-term, allowing it to grab market share elsewhere while Tesla is busy building batteries for its own cars.
Of course, even that result might be OK with Musk. After all, when Ford (NYSE: F) announced its 2021 Mustang Mach-E electric last month, Musk had nothing but praise for his rival's new E-SUV. "Sustainable/electric cars are the future!!" tweeted the Tesla boss, continuing that he was "excited to see this announcement from Ford, as it will encourage other carmakers to go electric too."
Given Musk's well-known desire to see the automaking world go electric and phase out the internal combustion engine, he might very well be willing to see other companies' cars, and other companies' batteries, become more popular than his own. Of course, that wouldn't be great news for Tesla stock -- or Tesla shareholders.
They may just have to hope that however well GM (and other automakers') EVs sell, Tesla's upcoming Gigafactory-supplied Model Y, electric semi, Cybertruck, and Model Y crossover will sell even better.