Tesla's Fate Riding On Elon Musk's Risky $5 Billion Plan

Posted: Feb 26 2014, 9:56pm CST | by , Updated: Feb 26 2014, 10:24pm CST, in News | Cars & Vehicles

 

Tesla's Fate Riding on Elon Musk's Risky $5 Billion Plan
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Whether it’s shooting rockets into space, or building a $70,000 electric luxury car, Elon Musk has never shied away from a challenge. But now, he’s taking on a manufacturing project that might give pause to companies with much more experience.

On Wednesday, Tesla said it planned to spend $2 billion on a major factory whose focus will be large-scale battery production. The announcement came in a regulatory filing. Tesla is considering Southwestern states as a location for the factory, sych sa Arizona, New Mexico, Nevada and Texas.

Of the four, Texas has the most-developed automotive infrastructure, given that it is home to Toyota’s truck plant in San Antonio, and the General Motors truck factory in Arlington. Meanwhile, Austin has pushed hard to become a center of advanced automotive technology.

Tesla also said it expected partners to invest another $3 billion in the factory through 2020. The company’s current battery supplier, Panasonic, is likely to be involved. The plan, according to the New York Times, is to produce batteries more quickly, and make them from metal ore instead of from individual parts.

The plant, which Tesla calls a “Gigafactory,” would build about 500,000 lithium-ion batteries a year by 2020. That’s more than the number of lithium-ion batteries produced by all the automotive suppliers in the world last year.

Tesla has long contended that the limited supply of batteries for its cars has kept it from expanding faster. So, by producing batteries himself, Musk is signaling that he wants to be in control of Tesla’s fate.

He has good reasons to want to do so, because battery production has always been risky. Toyota is a leading example of the pitfalls of trying to find enough batteries.

In 2009, Toyota was eager to sell more Prius hybrids in the face of high gas prices, but was forced to curb sales when its supplier, Panasonic EV Energy, ran into a shortage of batteries. The same problem affected the Ford Escape hybrid as well as some of GM’s models.

Two years later, Toyota was forced to wait again when Panasonic ran into delays producing a new lithium ion battery for Prius models. Part of the reason for the shortage was the 2011 Japanese earthquake, which damaged production facilities.

Now, Tesla has the opportunity to take charge of its future and ensure that it has enough batteries so that it can expand its sales. And one lucky state is going to get to join Musk in that challenge.

Forbes Life Elon Musk

Source: Forbes

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