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A shortage of battery cells has hamstrung Tesla Motors' sales aspirations. Now, months after an initial hint from CEO Elon Musk, Tesla confirmed that plans to build a massive battery gigafactory are underway.
In a letter to shareholders, Tesla wrote:
Very shortly, we will be ready to share more information about the Tesla giga factory. This will allow us to achieve a major reduction in the cost of our battery packs and accelerate the pace of battery innovation. Working in partnership with our suppliers, we plan to integrate precursor material, cell, module and pack production into one facility. With this facility, we feel highly confident of being able to create a compelling and affordable electric car in approximately three years. This will also allow us to address the solar power industry's need for a massive volume of stationary battery packs.
Talk of a giga factory came up late last year during Tesla's third-quarter earnings call. At the time, Musk said cell supply was crippling Tesla's effort to expand its global reach. As a result, the company wasn't aggressively marketing its cars, a strategy that has continued.
Musk revealed little back in November, only saying it would be a giant facility with capacity comparable to all of the lithium-ion battery production in the world.
A few more details were revealed in the fourth-quarter earnings call this week. Musk said he would expect more than one partner in the giga factory. He didn't name any companies specifically. But he did say the assumption was that Panasonic—which agreed last year to provide Tesla with 2 billion battery cells over the next four years—would continue to be a partner. Other partners might be companies that make the precursor materials, he said.