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Tesla Will Break Ground on Multiple Gigafactory Sites -- And California Is Now in the Running

Musk is full steam ahead on Gen III production and construction of multiple battery plant sites.

Courtesy: Tesla

Tesla Chief Executive Elon Musk said the company will break ground on at least two competing sites for its much discussed Gigafactory, in order to ensure the massive battery plant is online when the company is ready to kick-off production of its forthcoming mass-market car.

While starting construction at several sites means obvious wasted spending, it won’t cost as much as being forced to idle the then-ready production line if there isn’t a factory cranking out the lithium-ion batteries that will power the “Gen III” car, Musk explained during an investor conference call on Tuesday afternoon.

“If we don’t have the Gigafactory online when we have the vehicle capacity online we’ll actually be in deep trouble,” he said. “We’ll have all the equipment, tooling and people for making the cars, but not able to produce the battery packs.”

The first groundbreaking will occur on June 1, although the company still can’t disclose the location, a Tesla spokesperson said. The second will come one to two months later.

Tesla has said the Gigafactory could begin production in 2017, and churn out batteries for as many as 500,000 cars per year by 2020. The company only expects to produce 35,000 cars in 2014.

Tesla expects to invest around $2 billion in the plant, with another $2 billion to $3 billion coming from partners.

On that front, Musk said that Panasonic has a signed letter of intent to become Tesla’s main partner on the factory, as was expected. Panasonic is already Tesla’s main supplier of lithium-ion batteries for its vehicles.

The companies have formed a joint working team that is meeting “almost daily and certainly weekly” to explore all the relevant questions and issues, said JB Straubel, the company’s chief technical officer, during the presentation.

“We’re actually quite comfortable that we’re headed to a final agreement in the later part of this year,” he said.

Musk described the Gigafactory as a “industrial park under one roof,” where Tesla would be the landlord and produce battery modules and packs. Panasonic would be the only company producing battery cells in the Gigafactory, while other companies there would make the precursors and other component parts. (Basically, battery cells make up modules, which are assembled into packs.)

The Gigafactory is critical for Tesla because its key challenge has not been a lack of demand, but the constrained worldwide supply of lithium-ion batteries. That shortage pushes up the price, which makes it difficult to deliver an affordable electric car.

When Tesla detailed plans for the plant in February, it said it would produce more lithium-ion batteries in 2020 than the total global output last year and would help drive down the per-kilowatt cost of battery packs by more than 30 percent.

“I think we’re highly confident at this point of achieving the 30 percent reduction in cost per kilowatt hour and maybe moving toward cautiously optimistic about exceeding that number,” Musk said.

In yet another bit of Gigafactory news on Tuesday, Musk said that California is now in the running as a location for the plant. The Golden State didn’t appear on the list of contending sites released in February, a conspicuous absence given that Tesla’s headquarters and production factory are in the San Francisco Bay area.

Musk said that California didn’t make the initial cut — while Texas, Nevada, Arizona and New Mexico did — because it would take too long to construct the Gigafactory in the state, given the “complex and lengthy process for approval” for development on so-called “greenfield” sites. But the company has met with Gov. Jerry Brown and his staff, who have “tried to do everything they can to make California a significant candidate for the Gigafactory,” including exploring possible legislative remedies.

“But the question of timing is still a big one, and we need to make sure ongoing operational costs are not significantly worse than other states,” Musk said. “California is in the improbable, but not impossible, category at this point,” Musk said.

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