The Rise of Tesla: Part 3 - GIGAFACTORIES
To achieve global dominance, Tesla created the ‘Gigafactory’ concept. Located on a site three times the size of Central Park, work on the first Gigafactory commenced in mid-2014 outside Sparks, Nevada. I visited the $5 billion Gigafactory in 2018. We drove from Reno to the factory and during the long drive to the facility, you gradually witness civilisation disappear. Down ‘electric avenue’ on a flat rocky desert plain, the vast shiny white complex stands. Wild horses can be seen roaming the grassy outskirts of the complex. Tesla states its “mission is to accelerate the world’s transition to sustainable energy though increasingly affordable electric vehicles and energy products” and these are the words that greet you on the towering white wall behind the reception area.
I took a selfie outside the factory only to be quickly accosted by security and told to delete the photograph. No images were allowed inside the belly of the secretive white beast. Inside I was treated to the full tour where battery cell packs and drive train components are built. Tesla decided to build the Gigafactory to achieve ‘vertical integration’ - a strategy whereby a manufacturer owns its supply chain and is not dependent on external companies for key components.
This was out of necessity as Tesla’s production goals require millions of battery packs with tens of millions of battery cells. The factory was conceived to be energy self-sufficient with the entire roof to be covered in solar panels and supported by wind turbines. The state of Nevada awarded $1.3 billion in tax incentives to Tesla as the plant promised to create over 10,000 jobs.
The planned scale for the site is staggering. When fully completed it will have the largest footprint in the world, and second only to Boeing’s Everett factory by volume. Giga 1 was essential to the scale-up and mass production of the Model 3. The factory started production of Tesla Power-packs and Power-walls (battery storage for home and businesses) in early 2016. The building is aligned with true north to allow the optimal installation of solar panels on the roof complete with track equipment by GPS. As the Gigafactory has ramped up, the cost of battery packs has reduced accordingly. Reducing the cost of battery production per kilowatt of energy produced is essential for the future mass affordability of electric cars (I’ll explain this later). The Gigafactory’s aim is to produce more battery capacity than all the battery capacity of all the current factories around the world.
Clutching a cup of Gigafactory 1 Blend coffee, I passed a high-speed feeder belt with thousands of Panasonic 2170 cells racing towards their next stop in the production line. Witnessing the 7,000 plus cells it takes to build a battery pack first-hand, together with the battery cooling systems and overlying battery connectivity, the achievements of Tesla founders Tarpenning and Eberhard truly dawned on me. Without their first experiments, none of this would have happened.
In 2018 Giga 1 hit over 20 GWh of battery production making it the highest-volume battery plant in the world. What started in the Nevadan desert has since been replicated. Musk has stated that 12 Gigafactories are planned worldwide, also stating that 100 could power the whole world.
Giga Shanghai went operational in November 2019. New Berlin and Texas facilities are both under construction while Giga New York began operations in 2017.
SHANGHI BERLIN AUSTIN INDIA
Tesla needs global facilities and fast. Tesla may have had a 10-year electric head start on the ICE makers but could fall victim to its own success. Tesla has woken these sleeping giants. Almost every major manufacturer has announced their intention to go electric in recent years, terrified to be left behind in the electric revolution. The words ‘Tesla Killer’ have been uttered at almost every new electric model announced by the likes of Jaguar, VW, Audi and Porsche.
But it’s not the cars that worry Tesla, it’s its own capacity to compete. As the electric revolution shifts from linear to exponential, Tesla will need to produce VW scale numbers to compete. Building new Gigafactories quickly in far-away markets is vital for Tesla to not be out-disrupted.
To this end, China became the first Giga announcement outside of the US. In July 2018 agreement was reached for Tesla’s third Gigafactory, in Shanghai. At lightning speed, the site went from green field to producing the Tesla Model 3, employing over 2,000 workers, in just 10 months.
Built with an investment of over $2bn, a significant proportion made up of government-supplied working capital loans and a 60-month tax break, the plant aims to produce at least 250,000 cars per year in phase 1 and up to half a million when fully scaled up.
In February 2021 Tesla gained approval from the Chinese Authorities to expand the facility to produce the planned entry-level $25k car – referred to as the ‘Model 2’. A design centre has also been established in Shanghai Giga, the first outside the US to design future models for global consumption.
With Asia now bagged, it was time for the Tesla team to select a new Gigafactory in Europe. After months of rumour and speculation, a greenfield site east of Berlin was selected. Much to the embarrassment of the lethargic German Automakers, Chancellor Angela Merkel offered Musk ‘whatever it takes’ to make the Berlin site a success. At the pace Tesla established China, making the established German brands look pedestrian by comparison, work commenced on the new Berlin-Brandenberg Giga in early 2020.
Announcing that the factory would ultimately become the most advanced high volume EV production site in the world, Giga 4 will build batteries, battery packs and assembly of the Model 3 and Y.
Austin Texas became the choice for Gigafactory 5 and the 6th Gigafactory may be in Karnataka India. India, now the fourth-largest auto market, ahead of Germany, could build a more cost-effective care, specifically for the lower end market segments.
Even though in 2021 Tesla was the most valuable car brand in the world, it is not even in the top ten for global car sales. Toyota, Volkswagen and Ford make up 25% of the global market alone. Tesla has just 1.5% of the auto market sales in the US and less than 1% in the rest of the world. Even with the impressive pace of new factories springing up, Tesla can’t achieve the EV revolution alone, competitors will need to make the electric shift on a massive scale.
