Tesla's Battery Magic

Tesla and its CEO Elon Musk are on a roll. The Silicon Valley start-up’s stock price has nearly doubled in recent months after rising 400% last year. Consumer Reports named Tesla’s luxury Model S the best overall car of the year. And the company is unveiling plans for a $5 billion ‘gigafactory’ to produce lithium ion batteries in the desert southwest.

Under consideration for a year, the battery plant will be built by Tesla and possibly two other partners. It is a huge prize being contested by four states—Nevada, Arizona, New Mexico, and Texas.  It will encompass 500 to 1,000 acres and employ 6,000 workers. Bidding is fierce but the early favorite is a location near Reno, relatively close to Tesla’s auto production plant in San Francisco’s East Bay.

Analysts say however that if sales continue to surge Tesla may want a second assembly plant to produce its third-generation, more affordable electric cars that are due by 2020 when battery output is expected to reach half a million packs per year.  The plant requires abundant sunshine for solar power.  One prospective partner, Japan’s Panasonic, is currently Tesla’s sole battery supplier.

Musk, the engineering genius behind Tesla, Space X and SolarCity, says at full capacity output from the gigafactory will equal all lithium ion batteries currently produced worldwide.  The Model S uses 7,000 of the small AA-size batteries pictured above.  They are arrayed in a rectangular pan housed under the floorboard. Musk believes future cells will be lighter weight and that economies of scale will drive down battery prices by 30%.

A shortage of batteries has limited Model S production and may do so again this year as Tesla wants to boost car production 50% to 35,000 vehicles.

The battery plant sweepstakes and the promise of thousands of well paying jobs builds the Tesla brand and the favorable publicity to boost future sales. Morgan Stanley analyst Adam Jonas expects Tesla could double its share of the global car market to nearly 1% by 2028. Must says Tesla hopes to produce half a million electric vehicles annually by the end of the decade, half of them in the US. The gigaplant could supply cells to other EV producers.

Tesla supercharger locations

As part of Tesla’s brand-building strategy, Musk will soon out on a cross country journey that will showcase the company’s network of superchargers. The charging stations are cost free to Tesla owners.  They have been built at 200-mile intervals from LA across the country’s midsection to the east coast.