How do you beat the world’s largest car manufacturer? It’s not by giving them business, it’s by undercutting them at their own game. That’s what Tesla is doing with the Gigafactory
And while they might be making their competitors squirm, they’re also paving the way for electric cars to truly become the norm. The Gigafactory isn’t just Tesla’s most important invention because of its size or capacity – it may well be one of the most important inventions in history!
The word Gigafactory has become synonymous with big. How big? Why it’s a factory so big that it produces enough batteries to power 500,000 electric cars every year. It’s a factory so big that it’s expected to consume more energy than all of Buffalo, New York. It’s a factory so big that when complete, it will be visible from space (the structure will stand just about 1 mile tall—or nearly three times taller than One World Trade Center in NYC). And as one journalist put it: It is simply impossible to overstate how colossal these things are… They look like mountains. But why build them?
Well, although they’re big, they’re actually supposed to save money. Think about it: a typical lithium-ion battery currently sells for about $500 per kilowatt-hour. At that price, a Model S costs around $40,000 for its 85 kWh battery (if you subtract out some of its other components). That gives an idea of how much labour and materials cost; it’s not too hard to imagine that there are quite a few thousand dollars in raw materials and labour involved just in building a single Model S battery!
And that’s why massive economies of scale are so important. Basically, if you can reduce battery prices by half through mass production, then it makes sense to build a factory big enough to reduce prices by at least that much. And in fact, estimates show that once they hit full capacity, Tesla will be able to produce batteries at $125 per kWh (or $1,000 for an 85 kWh battery). That means a $35,000 Model S (not counting other costs)…which explains why Musk says we’ll soon see the most affordable electric car by far on its assembly lines. The upshot
How it was achieved
While Elon Musk was researching how to produce batteries for his electric vehicles, he discovered that creating batteries at scale was a major challenge. As a result, Musk decided to build what he termed Gigafactories or factories on an unprecedented scale for the purpose of producing lithium-ion batteries. The first Gigafactory has been operational since 2016 and produces about 100,000 battery packs per week. The second factor, which will be twice as large as its predecessor, is currently under construction in Nevada and should be finished by 2020. More plants are planned around the world – with 1/3rd of them expected to be in China. Overall, they are estimated to cost approximately $5 billion each and create more than 6500 jobs in their respective locations.
A single Gigafactory could produce more lithium-ion batteries in a year than were produced globally in 2013, and each plant will be about 3 times larger than that. For example, The Nevada facility alone, which cost $5 billion to build, will have a capacity of 105 GWh per year by 2020. In comparison, Tesla’s California factory can currently produce 50 GWh per year with plans to increase that number to 125 GWh by 2018. By comparison, all existing battery plants combined have an annual production capacity of around 100 GWh per year as of 2016. Tesla also expects to build several more factories at locations outside of North America due to the high demand for electric vehicles in other parts of the world such as Europe and Asia.
A key component to delivering on their growth targets is to achieve economies of scale and minimize costs. To that end, each factory will be highly automated with all machines installed on a single floor. This means they will be able to run 24 hours a day at high capacity, maximizing efficiency and profit. The first factory in Nevada was 20% automated while volume was low, but that number has been increased to 50% with plans for 90% automation by 2018 when the volume is expected to reach full capacity.
What makes it such an important invention?
Well, for starters, it’s pretty darn big. How many Gigafactories does Tesla have? In short: Two. And they’re both massive! The first one measures 4.9 million square feet and holds enough lithium-ion batteries to power up to 500,000 cars each year (enough for roughly 7 billion electric miles). It cost $5 billion to build and came online in 2016. The second will be even bigger: 13 million square feet and around 10 times larger than its older brother when completed in 2020 (though it won’t reach full production until 2022). When operational, it will produce more lithium-ion batteries each year than were produced worldwide in 2013.
The world’s first Gigafactory will likely have that title for some time, and with good reason. The second will be only slightly smaller at 13 million square feet, but it’s when you look at their capacities that things get really interesting. The first factory, as mentioned above, can make around 500,000 battery packs per year. Tesla CEO Elon Musk has stated that by 2020, production at both factories combined could increase to over 35 gigawatt-hours per year—enough batteries to power 1.5 million Model 3s each year.
This is where things get really exciting. At 35 gigawatt-hours per year, a standard 3,000 square-foot battery factory could produce enough batteries to power nearly 12 million EVs per year. That’s enough to equal over 75% of every EV sold in 2017! In other words, Tesla could achieve its boldest goal—to sell 500,000 EVs each year by 2020—with just two factories and without breaking a sweat. The future of clean transportation might just be here sooner than we think…
Where can we see these technologies being used in the future?
Tesla’s Gigafactories are strategically located on major trade routes in California, Nevada, New Mexico and Texas, creating a geographically diverse manufacturing footprint that helps minimize shipping costs and logistical complexity. In addition to their role in battery cell and pack production, future Gigafactories will incorporate Panasonic’s newest lithium-ion cell technology and will also produce solar panels, Powerwalls and Powerpacks. Together these products will enable stationary storage applications including home use, commercial deployments and massive utility-scale projects like Hawaii’s Tesla Energy Project. These new building blocks are important to developing products that both complement and leverage each other – driving down cost while also improving functionality – ultimately helping change the way we all generate, store and consume energy.
The energy problem is so big, we can’t really solve it with a few power plants here and there, said JB Straubel, CTO of Tesla. We have to think bigger… The company will work with utilities, renewable energy providers and other industrial partners to scale these technologies. In addition to battery cell production at its Nevada Gigafactory, for example, Tesla will also produce Powerpacks that can be used for both utility-scale storage projects and home storage systems.
Since our first products were energy storage solutions, many assumed that Tesla would produce solar panels and electric cars. But, it turned out that other companies were much better at making solar panels and electric cars. They’re really hard to make well! It turns out that designing an all-electric car isn’t fundamentally that difficult; making one in volume, with reliability, safety and affordability are extremely difficult. That’s why we always focused on self-driving technology as our main mission: It only works if you can get a car to drive itself across most of its lifetime using only cameras, radar and sensors (no LIDAR), handle 15msec events without fail while being affordable for most people.
Since we are well on our way to making fully self-driving technology work, it means that anyone can use it in their car. That’s why Tesla vehicles have hundreds of sensors and cameras (360-degree visibility) and new hardware that enables computer vision. This is why every new car we produce has all of its critical safety systems (even if they aren’t activated yet) connected directly to its onboard computer using a dedicated redundant Ethernet cable. That way, if there ever was a software or electronics fault at any point in time, we could safely shut down parts or all of the car without interfering with braking, steering or other critical systems.
This means that when you buy a Tesla, you’re buying an electric car and a self-driving computer. It also means that any current or future product—from autonomy to supercharging—that works with our cars will get better as our software improves over time. That’s how we do it: instead of creating one thing and moving on to another, we just keep improving everything we make. This is why we made an electric car and then a bigger battery for that car, before making a big energy storage system for homes and businesses — because it only makes sense if you can build all these things together as one company.