Tesla Motors Inc. (NASDAQ:TSLA) made a huge news splash when it announced plans for its so-called Gigafactory. The giant battery plant is supposed to change the world of batteries as we know it. Maybe it will; but no company works in a vacuum, and Tesla's audacious plans have attracted not only attention, but competition. Maybe, just maybe, Tesla's factory won't be as big a deal as everyone thinks -- or at least not in the way they think.

Master of the game
If there's one thing that Tesla's Elon Musk knows a thing or two about it's publicity. With a few simple words or a tweet he can set investors all atwitter. And in recent times, there's perhaps no better example than the Gigafactory. Google it, and you'll get more than 400,000 results, including a Wikipedia page.

There aren't too many corporate announcements about what amounts to a new factory that can lead to that kind of content explosion. And to get even more attention, Musk openly made its location a competition between states. (Nevada won, in case you missed the news coverage.)

Source: ReubenGBrewer, via Wikimedia Commons.

To be fair, the Gigafactory is audacious. According to Tesla, the goal is to produce more batteries by 2020 in this one factory than the entire world created in 2013. So it's not like Procter & Gamble opening a new factory to make soap; it's like P&G opening a factory that makes more soap than all of the soap factories in the entire world (insert maniacal laughter here, Mini-Me). Tesla's goal is to reduce battery costs by as much as 30% by 2017.

This is big because batteries are one of the most expensive components of an all-electric car. Cut the cost, and you can materially reduce the cost of the car. That, in turn, will help to bring electric cars to a point where they can better compete with gasoline-powered autos. Musk and industry watchers are right to be excited about the Gigafactory and what it can do for Tesla and the entire electric-vehicle market.

Starting a war
The thing is, Tesla isn't the entire electric-car market -- far from it, in fact. And actions any one player takes invariably result in reactions. That's exactly what's happened at Boston Power.

Boston Power is a privately held lithium-ion battery manufacturer based out of Massachusetts, with manufacturing facilities in Asia. Its plan, according to CEO Sonny Wu, is to compete with Tesla's new factory. Wu recently explained to GreenTech Grid, "The market for EVs is very exciting given the backdrop of Tesla -- but Tesla, that's just the beginning."

Boston Power has received funding from the Chinese government to expand a facility in Liyang fivefold by 2016, and materially expand another plant in Tianjin, as well. In the near term, it hopes to increase its production threefold this year alone, according to the Wall Street Journal. A big benefit, of course, is that building and operating a factory in Asia is a lot cheaper than building and operating one in the United States.

While Boston Power's 2015 production target of one gigawatt-hour a year worth of batteries is a far cry from Tesla's target of 35 gigawatt-hours a year, Tesla's goal is still years away. In other words, Boston Power has time to build out its factories and narrow the gap.

Source: Tokumeigakarinoaoshima via Wikimedia Commons.

A different market?
Boston Power isn't exactly looking to compete directly with Tesla. Boston Power wants to tap into growing demand in China, which is notably at the lower cost end of the auto spectrum. But that doesn't mean that Tesla doesn't have to worry about Boston Power -- and likely others -- looking to ramp up production. And don't forget about all those battery factories that are producing batteries today... they aren't all going to shut down just because Tesla builds a new facility.

The end result of Tesla's Gigafactory could be an industry overcapacity issue that will push pricing down to the point where battery makers have a hard time making money. While that will clearly help keep costs down for consumers, it could pinch margins on what is one of the most expensive aspects of an electric vehicle.

Tesla, living at the high-end of the market, can probably handle such a hit better than most. Boston Power, at the low-end, might have more trouble. But both are likely to see the top and bottom lines affected if a price war breaks out because of Tesla's "shot across the bow" in the battery market.