Tesla, Inc. (TSLA, Financial) is laying plans to build a new gigafactory in Berlin, Germany. CEO Elon Must said that the facility would be the world's largest battery-cell factory. The company has already begun constructing the plant in a forested area, and it is scheduled to open next year.
The factory will be Tesla's first in Europe and it is expected to be able to mass-produce 500,000 Model 3 sedans and Model Y SUVs per year. At the European Battery conference, which is a three-day event that explores the prospects of battery manufacturing in Europe, Musk told an interviewer that the battery cell production capacity would be around 100 gigawatt hours per year and would go over 200 or 250 GWH per year later on.
Tesla aims to achieve mass production
To achieve the mass-scale battery production, the company would need new advanced machinery, which is currently still being designed. A large portion of the crucial equipment is being built and sourced from elsewhere in Europe.
The specialized equipment would be utilized at pilot plant level initially. Musk has not provided any timeline as to when the factory would be ready to produce batteries in large scale. However, he expressed that a lot of innovative methods are being tested to reach mass scale production. Once the company is able to work out and finalize on the specialized equipment, it would move towards scaling up the process.
Tapping the European EV market
While Europe only makes up a fraction of the worldwide electric vehicle battery production market, Chinese, Japanese and Korean firms are leaders in the market. The European electric vehicle market is booming, and Tesla wants to be part of this growth story by making inroads in the region with its gigafactory.
At the recently held Tesla Battery Day in September, Musk predicted that global annual demand for batteries should come around 20-25 terawatt-hours to shift to zero carbon emissions. The demand estimation includes batteries both for electric vehicle and for storage purposes. Benchmark Minerals projects that by 2028, the global capacity for battery production will be about 1.45 terawatt-hours.
Roadblocks ahead
The on-going construction of the gigafactory has been held up by the local residents and environmental campaigners concerned about the damage the gigafactory will cause to their land. Much of the construction work so far has been carried on by the company through advance permit. However, the company cannot resume its production until it receives the proper building and construction permits.
As per the reports, roughly 300 hectares of pine trees were cleared from the site in order to build Tesla's production site. One of the concerns from locals is that clearing the forest and covering it with cemented surface will adversely impact water supply to the local population as the amount of rainfall that trickles into the area's natural reservoir would be reduced.
Despite the pushback, Tesla seems certain that it will complete factory construction by July.
Disclosure: I do not hold any positions in the stocks mentioned.
Read more here:
- Key Takeaways From Deere & Co.'s 4th-Quarter Results
- Dollar Tree's 3rd-Quarter Results: Key Takeaways for Investors
- What Investors Should Know About Hormel Foods' 4th-Quarter Results
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
