Seventeen months ago, business and social media was abuzz with electric automobile maker Tesla Motors’s audacious plans to build its own $5 billion electric battery “gigafactory within the United States, capable of supplying up to 500,000 electric vehicles per year.  Plans indicated that the plant, would ultimately be able to produce batteries at 30 percent less cost, and when operational, would provide the capacity to be the single largest battery manufacturing volume plant in the world.  To state the obvious, the strategy was a bold and savvy thrust involving vertical integration, given that of the entire value-chain and cost-of-goods sold (COGS) for an electric powered automobile, the batteries are indeed the highest portion of cost.

Tesla battery gigafactory

Source: Tesla Motors

Since the February 2014 announcement, a far broader strategy has been unfolding, one that will extend beyond automotive supply chain needs. In September of last year, Tesla selected a site within the state of Nevada, just outside of Reno. Thus far, the steel structure and roof of the new factory have been completed. Tesla has partnered with Japan based Panasonic to assist in the setup of production processes within the new gigafactory. By autumn, Panasonic will dispatch hundreds of its employees to Nevada to assist in the plant internal design and setup.

In June, Tesla entered into a research partnership with a noted professor at Dalhousie University in Nova Scotia, known for his work in innovating lithium-ion batteries. The goal of this research partnership is to determine methods to incorporate more voltage as well as less cost of materials within batteries without eroding their longevity. According to a published report, Tesla is further investigating its own sourcing and processing of lithium, cobalt, graphite and nickel.

This week featured news indicating that Tesla has now increased its land holdings surrounding the new plant, purchasing an additional 2000 acres. The land purchases reportedly occurred during April and May with the majority of the land, according to Tesla, serving as a buffer zone in which solar arrays are to be constructed to provide internal power to the new factory.

According to a published report from The Wall Street Journal, battery cells will begin to roll-off production lines by the end of 2016, with plans for additional phased ramp-ups extending through the year 2020. Once more, up to 25 percent of the new plant’s capacity is expected to be allocated for production of static storage battery needs for homes, businesses and utilities. Tesla recently unveiled a new line of home storage batteries and the firm’s iconic founder, Elon Musk recently indicated that there has been positive interest from other industries in exploring potential battery supply agreements.

Tesla’s corporate culture of thinking big continues to extend across the supply chain and the new gigafactory will be the most significant testament to that boldness in supply chain vertical integration.

For added information regarding this new factory, readers can review Tesla’s conceptual design.

Bob Ferrari