SPARKS, Nev.—Tesla Motors Inc. is scrambling to finish building
its massive $5 billion battery factory here years ahead of schedule
to meet demand for its coming cheaper sedan and provide power for
new types of vehicles Chief Executive Elon Musk says are under
development.
Tesla has doubled the amount of people constructing the
"gigafactory," which sits on more than 3,000 acres near Reno. Now,
1,000 workers build seven days a week on two shifts in an effort to
start churning out lithium-ion cells by early 2017.
"We have to be ready with cell and pack production well ahead of
vehicle production," JB Straubel, Tesla's chief technical officer
and co-founder, said during a walk-through of the factory. "We're
accelerating our construction plans and accelerating our planned
ramp up of cell production."
The goal is to have the factory operational before the launch
next year of the $35,000 Model 3 sedan, which is about half the
base price of the Model S. Tesla opened reservations for the Model
3 earlier this year, and strong demand led Mr. Musk to pull a
500,000 sales target ahead two years to 2018. He also raised $1.7
billion through a stock offering in hopes of speeding up battery
production expected to lower the cost of the batteries for electric
vehicles.
As of now, the gigafactory's structure is less than one-sixth
the size of what the final building is expected to occupy. Most
exterior walls are temporary and can be relocated. Already finished
is a four-story rectangular portion of the facility, housing 1.9
million square feet of floor space.
Tesla already is building battery packs for its battery storage
business there, but is importing the battery cells from Panasonic
Corp. facilities in Japan.
Panasonic has committed up to $1.6 billion to the factory. Joe
Taylor, chief executive of Panasonic North America, said the
company is struggling to find qualified workers with manufacturing
abilities. "We are running around like crazy hiring people." The
Japanese electronics giant is handling the cell manufacturing and
pulled forward installation of equipment.
Mr. Musk in recent weeks has laid out aggressive expansion plans
for Tesla, including heavier vehicles and an energy-storage
business that marries Tesla's battery business with SolarCity
Corp.'s solar panels. Mr. Musk, chairman and largest shareholder of
both companies, has proposed a $2.8 billion merger of Tesla and
SolarCity.
The roof of the new factory will be covered in SolarCity's
panels. A solar-panel field will be constructed nearby to provide
additional power to the factory.
Once completed, Mr. Musk anticipates the new plant could be
capable of producing a total of 105 gigawatt hours of battery cells
by 2020, or enough to power 1.2 million Model S sedans—though up to
one-third of those batteries are slated for stationary battery
storage. About 50,000 Model S sedans were built in 2015.
The auto maker has struggled to build vehicles since it opened
its Fremont, Calif., plant, suffering quality problems in addition
to supply constraints. Problems building the Model X SUV have
limited sales in 2016. Earlier this year, the auto maker lost both
its chief of production and head of manufacturing.
Tesla earlier this month said that it had achieved regular
levels of higher production and expected to produce 50,000 vehicles
in the second half of 2016. Through the first six months it had
delivered fewer than 30,000 vehicles.
Tesla's gigafactory will be the first ever to make a new format
of battery—a 21/70, rather than the 18/650 that the auto maker uses
today for the Model S and Model X. The latter cylinder-shaped
battery is commonly used in portable electronics and has been used
by Tesla since the beginning. The numbers stand for the width and
length in millimeters.
Virtually all lithium-ion battery production today is in Asia,
and efforts by the U.S. government to establish a domestic battery
production industry have had mixed results. A factory operated by
South Korea's LG Chem in Holland, Mich., has been successful,
handling the battery for General Motors Co. vehicles. Mr. Musk last
week signaled there would be even more demand from his battery
factory. The company aims to introduce several more electric
vehicles, including a small sport-utility vehicle, a light pickup
truck, a heavy-duty truck and a bus.
Nevada has promised Tesla incentives that could be worth $1.3
billion over 20 years, including the construction of a highway that
speeds travel from near Carson City to the industrial park where
the factory is located.
"We think this has been a great decision and has really been to
Nevada's benefit," Economic Development Director Steve Hill said.
Interest in the state for economic development surged after the
Tesla decision, he said.
Through the first quarter of 2016, the state had given Tesla tax
credits worth $9.6 million. Reno realtor Marshall Corrasco said
Tesla's arrival has spurred a jolt to the local real-estate market
and seems to have attracted other high-tech companies to the
region. "The biggest thing is getting a big corporation like Tesla
and Apple to pay attention to us," he said. "But the Tesla project
is in the infant stage. If it goes bust we will be stuck with the
bill."
If Tesla is successful at its plant in Nevada, it could outpace
all the world's existing plants' production by a factor of 10. The
factory's size has led to a string of efforts to mine commodities,
like lithium, in North America and to bring more processes to the
region.
"If you look at where batteries are being made, it's almost all
in Asia," Mr. Straubel said. "That was one of the big opportunities
we have here, is to close the logistics loop from where cells are
made and materials are made and move it closer to where our
vehicles are made."
Write to Mike Ramsey at michael.ramsey@wsj.com
(END) Dow Jones Newswires
July 24, 2016 21:45 ET (01:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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