Tesla Motors, Inc. (TSLA) will be announcing at least two sites for the planned ‘Gigafactory’ (large-scale factory) construction in the U.S., according to media reports. The automaker intends to break ground for construction work at the sites simultaneously, although only one will be used for construction of the Gigafactory initially.
This unusual move is being made to avoid any last-minute problem in construction of the plant. Tesla wants to ensure that the factory is ready to supply lithium-ion battery packs within three years.
This decision will increase the costs of Tesla. However, the company seems to be laying emphasis on preventing a delay in construction of the factory. Moreover, Tesla might require more than one Gigafactory in the future, according to CEO Elon Musk.
Tesla is expanding its operations and plans to increase the production of Model S vehicles by 56% this year. The Gigafactory will produce low-cost battery packs to help the automaker launch less expensive vehicles in market on time.
In Feb 2014, Tesla announced its plans to build a Gigafactory to supply lithium-ion batteries to the company’s Fremont, CA, assembly plant. It expects the factory to provide economies of scale and reduce production costs based on innovative manufacturing techniques, reduced logistic wastes, optimization of co-located processes and lower overhead costs.
Earlier, Tesla analyzed 500 to 1,000-acre sites in Nevada, Arizona, New Mexico and Texas for the construction of the factory, which will be employing around 6,500 people.
By 2020, Tesla expects the annual lithium ion battery production at the Gigafactory to exceed the global production recorded in 2013. The factory is likely to manufacture enough batteries required to build around 500,000 electric cars by 2020. Also, by the end of the first year of manufacture, per kWh cost of production of the battery packs is expected to be down by over 30%. Eventually, the facility will also supply battery packs to SolarCity (SCTY).
The construction of the factory will require an investment of $5 billion. Tesla intends to finance the construction from the proceeds of a senior notes issue. The company raised $2.3 billion from convertible note sale in Mar 2014.
Tesla is also focusing on the launch of the third-generation car in 2015. The vehicle is likely to be priced on par with a BMW 3-Series sedan or at about half of the base price of Model S.
Recently, Tesla celebrated the opening of the 100th supercharger station in Hamilton, NJ. Superchargers help to charge the Model S faster, facilitating long-distance travel. At present Tesla have 87 Supercharger stations in North America and 14 in Europe. The company is expanding the Supercharger network rapidly.
Tesla currently carries a Zacks Rank #4 (Sell). Some better-ranked automobile stocks worth considering are Volkswagen AG (VLKAY), PACCAR Inc. (PCAR) and Fox Factory Holding Corp (FOXF). Volkswagen sports a Zacks Rank #1 (Strong Buy) while PACCAR and Fox Factory carry a Zacks Rank #2 (Buy).
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment