Much of the focus on Tesla's (NASDAQ: TSLA) business surrounds the company's recently launched Model X and its upcoming Model 3. Of course, it makes sense that the market is watching these items closely -- both vehicles represent the company's next two major catalysts for growth. But a huge ramp in production to support all of the company's expected growth wouldn't be possible without its currently under-construction Gigafactory.
So, what's the current status on Tesla's Gigafactroy? Below is an update on what Tesla has said recently about its progress to-date on the important battery factory.
But first, for the investors unfamiliar with what the Gigafactory is, here's a quick summary:
Tesla's ambitious vision for mass-market adoption of electric vehicles is up against one major problem: there aren't enough batteries being produced to support the Tesla's production goals. This is where the Gigafactory comes in.
For Tesla to produce just 500,000 vehicles per year by 2020, Tesla's total cell production would need to exceed the world's entire cell production in 2013. The Gigafactory, therefore, is purposed to solve the bottleneck Tesla would run into as it ramps up production of its vehicles if the factory didn't exist.
By 2020, the company hopes the factory can be producing 35 gigawatt hours per year at the cell level and 50 gigawatt hours per year at the pack level. In 2013, there was less than 35 gigawatt hours in cell production globally.
The factory is supposed to cost around $4 to $5 billion total through 2020 and the cost will be shared between Gigafactory partners, particularly Panasonic.
Here was the initial timeline for the Gigafactory.
Tesla wasn't initially planning to begin ramping production in the factory until 2017. But the timeline has changed a bit.
A Gigafactory update
Here's what management has said about the Gigafactory in Tesla's most recent quarterly update:
- Both construction and production at the Gigafactory are "ahead of schedule."
- In early Q4, Tesla relocated its production of its Tesla Energy products from its factory in Fremont to "an automated assembly line at the Gigafactory."
- Tesla's relocation of Tesla Energy product assembly to the Gigafactory positions the company "for strong growth in 2016," management said.
- Going beyond product assembly, Tesla is now also planning to begin cell production for Tesla Energy products at the Gigafactory "by the end of 2016." This is several quarters ahead of Tesla's initial plan.
- One the key drivers of Tesla's planned $500 million in capital expenditures during Q4 is "accelerated investments in the Gigafactory."
- Management says Tesla is on target for the first cell production allocated to vehicles in 2017, noting these cells will support Model 3 pack production.
Tesla has emphasized on several occasions that it's imperative that the Gigafactory is on time. If it were running behind, Tesla could risk having the tooling ready for Model 3 body and motor manufacturing and assembly, but be constrained by battery production. The company hopes its Model 3, which will be its first vehicle at a mass-market price point, will drive demand for its cars significantly higher.
Overall, Tesla is slightly ahead of schedule on the Gigafactory, already integrating production from the factory its operations with an automated assembly line for Tesla Energy Products.
Look for an update from Tesla on its Gigafactory progress when it reports fourth-quarter results on February 10.
Daniel Sparks owns shares of Tesla Motors. The Motley Fool owns shares of and recommends Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.