With pro football season about to begin, we thought it appropriate to use a gridiron metaphor: one research firm is estimating that Tesla Motors will outkick its coverage when it comes to the Gigafactory it's planning for the western US, likely Reno, NV. The electric-vehicle maker has said needs the giant battery plant because its annual sales will reach a half-million by the end of the decade. Lux Research is saying the company's EV sales will be closer to about half that.

In fact, Lux says, Tesla will have to sell much of its battery-pack production to either other automakers or to entities such as solar-panel makers for their stationary-battery needs because of overcapacity. And with Panasonic footing the bill for a good chunk of the estimated $4-5 billion pricetag for the plant, the battery maker will also be taking a bit of a bath, at least for the first few years.

Tesla has said its Gigafactory will help it cut battery costs by about 30 percent by 2020, and could have it up and running as soon as 2017. Tesla spokeswoman Alexis Georgeson said in an e-mail to AutoblogGreen that the company wouldn't comment on the Lux Research report (they're probably busy preparing for this afternoon's Nevada announcement) but you can still take a look at Lux Research's short summary of the report called The Tesla-Panasonic Battery Gigafactory: Analysis of Li-ion Cost Trends, EV Price Reduction, and Capacity Utilization below.
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The Tesla-Panasonic Battery Gigafactory: Analysis of Li-ion Cost Trends, EV Price Reduction, and Capacity Utilization

August 13, 2014 | State of the Market Report

Tesla Motors has found initial success in the luxury electric vehicle market, and will look to capitalize on that momentum through aggressive expansion, planning a new 35 GWh lithium-ion (Li-ion) cell production facility. Dubbed the "Gigafactory," it poses a tremendous risk for Tesla and its partner Panasonic, and herein we analyze whether the $5 billion investment is justified by electric vehicle (EV) sales volumes and the interrelated question of breaking through the price floor for Li-ion batteries. We find the Gigafactory will only reduce the Tesla Model 3's cost by $2,800, not enough to truly influence whether this lower-cost EV will be a success or not. Moreover, our analysis indicates that in the likely case of Tesla selling 240,000 EVs in 2020, its partner Panasonic will be risking low margins, and the Gigafactory will be running at significant overcapacity, which other carmakers and stationary applications are unlikely to offset.


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  • 40 Comments
      jphyundai
      • 3 Months Ago
      Type your comment hereNo way, as long as it pushes the stock price up, it can never be too big...lol
      Edward W
      • 3 Months Ago
      I am very skeptical of these so called "experts" and their analysis of things they know little about. I'm certain the giga-factory's entire output, will be placed into use not only into Tesla's cars, but for high density energy storage as well. The naysayers must love punishment.
      Thunderbuck
      • 3 Months Ago
      There's a wide range of scenarios here, and Lux's report seems to represent an absolute worst-case scenario. If the plant can produce batteries economically, there will be a market for them even in the unlikely event that Tesla's cars can't use every ounce of their output. Batteries can be easily sold to other car manufacturers or for stationary applications.
      goodoldgorr
      • 3 Months Ago
      Massive investment for a company that has to turn a profit someday. I would have choose mexico instead
        purrpullberra
        • 3 Months Ago
        @goodoldgorr
        Tesla has admirable gross margins on their cars and has for a long while. They just reinvest what would otherwise be profit to grow. It is a basic tenant of business. But you are hardly the only one who doesn't understand even the simplest paradigms of business economics. And since Tesla is doing things that are WELL beyond basic it requires a certain amount of knowledge that many people, like you, don't have. So you get stuck in the wrong impression and then never get out of it's shadow. Everyone who knows intimately, exactly what Tesla are doing and the numbers behind the scenes are 100% on board with their growth, now and in to the future with the Gigafactory.
        purrpullberra
        • 3 Months Ago
        @goodoldgorr
        Tesla has admirable gross margins on their cars and has for a long while. They just reinvest what would otherwise be profit to grow. It is a basic tenant of business. But you are hardly the only one who doesn't understand even the simplest paradigms of business economics. And since Tesla is doing things that are WELL beyond basic it requires a certain amount of knowledge that many people, like you, don't have. So you get stuck in the wrong impression and then never get out of it's shadow. Everyone who knows intimately, exactly what Tesla are doing and the numbers behind the scenes are 100% on board with their growth, now and in to the future with the Gigafactory.
      purrpullberra
      • 3 Months Ago
      I knew this 'report' reeked of uneducated conjecture and purposeful misinformation when reading it the first time. It simply ignores too many facts that we know right now. Number 1. The demand for the Tesla Model3 will be one of the most incredible product launches in modern history. The sign up list will fill up in a way that one Tesla really knows. And since they (and Panasonic) are desperate to get the Gigafactory running ASAP we MUST assume that they are quite sure about the demand numbers. Concluding otherwise could be based on absolutely nothing. Then when you throw in the fact that other folks at this same place have recently said they DO BELIEVE that Tesla is going to just fine with demand over the same time frame you realize that this is a thinly veiled attempt to besmirch Tesla and to negatively affect the stock. I actually appreciate that since I want to buy more. But the 'report' is just about more fabricated problems. Still, purposefully forgetting that your coworkers concluded the exact opposite from your 'report' should be a career ender for what is apparently an incompetent rookie from James' reporting.
      Jim1961
      • 3 Months Ago
      Lux rhymes with schmucks. Just sayin'.
      Kevin Gregerson
      • 3 Months Ago
      There are a number of other factors in this. If we were talking about making batteries for just Telsa, sure. But the plans are far reaching in regards such as putting them in homes etc.
      Edward W
      • 3 Months Ago
      I am very skeptical of these so called "experts" and their analysis of things they know little about. I'm certain the giga-factory's entire output, will be placed into use not only into Tesla's cars, but for high density energy storage as well. The naysayers must love punishment.
      Edward W
      • 3 Months Ago
      I am very skeptical of these so called "experts" and their analysis of things they know little about. I'm certain the giga-factory's entire output, will be placed into use not only into Tesla's cars, but for high density energy storage as well. The naysayers must love punishment.
      Edward W
      • 3 Months Ago
      I am very skeptical of these so called "experts" and their analysis of things they know little about. I'm certain the giga-factory's entire output, will be placed into use not only into Tesla's cars, but for high density energy storage as well. The naysayers must love punishment.
      Todd W Thompson
      • 3 Months Ago
      And they don't know what they are talking about. Pano is involved and Pano won't have it's own contracts? duh. and, Lux forgot that the plant will also push out HOME UNITS. It is hilarious when these people just don't do their homework.
      Rotation
      • 3 Months Ago
      I doubt it. Demand for batteries will rise. If they don't use them in Teslas, they use them in solar systems in Hawaii (where net metering is semi-suspended due to grid strain).
        DarylMc
        • 3 Months Ago
        @Rotation
        Hi Rotation Can you send a link to the Hawaii issue. Solar power seems to be threatening the cost effectiveness of the electricity grid in a manner which also seems to have prompted a retreat here in Australia. It's lead to an even greater interest in battery storage. The eventual outcome seems to be that grid supplied power will be less and less attractive. That is probably not a good thing.
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