Earlier this week, the Nikkei Asian Review reported that Californian automaker Tesla Motors had reportedly reached a deal with Japanese electronics giant Panasonic which would see the two companies collaborate to built Tesla’s first ever lithium-ion manufacturing and recycling Gigafactory.
Today, both Tesla Motors [NASDAQ:TSLA] and Panasonic have confirmed the deal with a joint press release.
Due to be the largest lithium-ion battery manufacturing and reprocessing plant in the world, Tesla’s massive Gigafactory will produce low-cost, high energy density, cylindrical lithium-ion cells for use in Tesla’s upcoming 2017 Tesla Model ≣. After 2018, the Gigafactory will also provide Tesla with lithium-ion cells for its Model S and Model X electric cars, which are currently being provided to Tesla by Panasonic.
According to the official press release, the Gigafactory agreement between both companies will see Tesla prepare, provide and manage the land, building and utilities needed for the Gigafactory. In turn, Panasonic will fund the installation and maintenance of the equipment and tools needed for lithium-ion cell production, making and supplying the cylindrical cells directly to Tesla.
Most importantly, Tesla will continue to purchase battery cells from Panasonic’s existing production facilities in Japan as required, to ensure there is no constriction of vehicle production at the Fremont factory where the Tesla Model S is currently made and the Model X (and presumably the Model ≣) will be made.
Although the press release hasn’t given us any further information on the amount of investment Panasonic is making in the Gigafactory, we do learn that the Gigafactory itself will be more of a multi-company endeavour than a single entity.
For example, Panasonic is expected to occupy around half of the 1,000 acre site, with the other half occupied with key suppliers involved in the manufacturing and assembly of Tesla’s finished lithium-ion modules and battery packs.
Based on what we’ve heard from Tesla CEO Elon Musk in the past, the Gigafactory complex is also expected to set aside space for battery recycling, bringing everything from individual cell manufacture and recycling through to final battery pack assembly under one roof.
From a business perspective it’s this fully integrated approach which makes it possible for Tesla to use a combination of economies of scale and co-location of providers to massively reduce the cost of making electric car battery packs.
In turn, this makes the promise of a 200+ mile, $35,000, affordable Tesla Model ≣ a reality. By 2020, Tesla says, 6,500 people will be employed on the Gigafactory site, producing 35 GWh of battery cells and 50 GWh of battery packs per year.
All Tesla has to do now is to officially announce the location of its first Gigafactory site — something we’re expecting to hear about later on today in its Q2 earnings call — and ensure that the facility is up and running in time for Model ≣ production in 2017. While we’ve not heard yet from Tesla where its Gigafactory will be sited, the current favourite is a top-secret development taking place in Reno, NV — even if some of the people working on the site were recently laid off.
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