Tesla Motors Inc (TSLA)’s Gigafactory to Take Center Stage

Tesla Gigafactory invitation RSVP

Tesla Motors must unlock the key to rapid growth in order to reach the mass market and to enjoy the economies of scale. If the firm fails to scale, it might end up as a niche player and bigger rivals in the auto industry could outrun it. Elon Musk is pinning his hopes on the $5B Gigafactory being built in the Nevada dessert as the key that will unlock growth for the firm. Now, it appears that Elon Musk is ready to open the Gigafactory on July 29.

Tesla Motors Inc (TSLA) Gigafactory

The news about the opening of the Gigafactory seems to be the only bright spot that Tesla has right now amidst all the negativity surrounding autopilot and its stock. The firm is facing intense scrutiny over the safety of its Autopilot system. Musk is bowing to public opinion and he has revealed that he’ll make big changes to how Autopilot works.

Here’s what we know about the Gigafactory

The Gigafactory is joint project between Tesla Motors and Panasonic – Tesla is putting down about $5B for its own side of the project. The Gigafactory has the capacity to build 500,000 lithium ion batteries every year.  Elon Musk has boasted that the Gigafactory will produce more lithium ion batteries than all the battery plants in the world combined. And Now, the Gigafactory is set to open on July 29.

In an official invitation sent to existing Tesla owners, the firm revealed it would provide a tour of the facility to some lucky owners. The firm also hints at showing the progress of its mass-market Model 3, and the firm is also open to giving owners test drives and factory tours before Elon Musk begins his official “remarks” by 9PM.

Not many people have had a chance to visit the Gigafactory; but we’ve seen lots of pictures and Musk’s humblebrag paints a vivid picture. During the Model 3 presentation, Musk said that the Gigafactory “is a vital element… to give you a sense of scale, the Gigafactory will have the largest footprint of any building of any kind.” Building experts have also noted that in terms of volume, the Gigafactory is second in volume to Boeing’s airplane factory in Washington. However, in terms of the land that it covers, the Gigafactory is the largest building in the world.

The Gigafactory to make or mar Tesla Motors

Before the introduction of the Model 3, Tesla Motors was contending with a brand image that depicts it as a firm owned by a billionaire who makes exclusive toys (cars) for the rich. However, Musk has a different plan for his firm, he wants Tesla to change transportation with EV; hence, the Model 3 was created to show the firm’s interest in the mass market.

The problem with making the Model 3 however, is that the current economics on battery doesn’t support its $35,000 sticker price. To make matters worse, the firm has received about 400K preorders backed by a $1000 deposit for the Model 3. The’crazy’ part is that most of these buyers are expecting the delivery of their cars by the second half of 2017.

The fates of the Gigafactory and the Model 3 are interwoven because the Gigafactory is being built to churn out batteries for the Model 3. There’d be lesser urgency on Tesla to build a Gigafactory if it wasn’t planning to build the mass-market Model 3. Musk says, “in order to produce half a million cars a year, we basically need to absorb the entire world’s lithium production ‘That’s the entire reason we’re building the Gigafactory.”

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.


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