Tesla Motors, Inc. (TSLA) and Panasonic Corporation’s (PCRFY) partnership for the Gigafactory is finally taking shape. According to Nikkei, the two companies have signed an agreement under which Panasonic will invest 20–30 billion yen ($194–$291 million) to supply the machinery for making the lithium-ion battery cells in the Gigafactory.
However, Panasonic’s investment in the Gigafactory might increase to $1 billion, per Nikkei. Meanwhile, Tesla is planning to invest $2 billion in the factory and will bear the cost for the land and buildings.
The total investment in the Gigafactory is expected to be about $4–$5 billion. Tesla will involve other partners in the plant to provide the rest of the financing.
The production capacity will be increased gradually according to demand. By 2020, Tesla expects annual lithium-ion battery production of the Gigafactory to exceed the global production in 2013. The factory will produce enough battery packs to allow the electric carmaker to build around 500,000 electric cars by 2020. Also, by the end of the first year of manufacture of the planned mass market vehicle, the per kWh cost of production of battery packs is expected to reduce by over 30%.
While the location of the Gigafactory has not been decided yet, Tesla is planning to hold ground-breaking ceremony for the factory at three sites to avoid any delay in construction. Construction work will begin on one of the three sites by the end of the year and will be wrapped up by 2017. Moreover, Tesla has hinted that it might build more than one Gigafactory over the years.
Tesla currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same industry include Tower International, Inc. (TOWR) and Visteon Corporation (VC), both of which sport a Zacks Rank #1 (Strong Buy).
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