Building all the PV & EV the world needs – Tesla plans to build 10% of that and shorten supply chains for future vehicles

By Kyle Field on Clean Technica, 7 June 2017

Tesla To Build 10–20 Gigafactories Around The World As It Scales Up (#ElonTalks)

The 2017 Annual Tesla Shareholder Meeting on June 6th blew the lid off of new updates on Model 3, Model Y, and Tesla Semi, while also providing updates on more mundane business matters. One massive update was about the number of Gigafactories Tesla is planning around the world. CEO Elon Musk shared that it is planning for at least 10 Gigafactories, but could build as many as 20.

The variance in his estimate is based on how other manufacturers respond to the challenge Tesla has thrown down. Let’s wind the tape back for a minute. Elon noted in the past that the world would need approximately 100 Gigafactories to produce all of the energy storage and electric vehicles it would need. His announcement today that Tesla would build 10 Gigafactories implies that it will own 10% of the world’s future energy storage and electric vehicle capacity.

Assuming Tesla can sell its cars, the full manufacturing capacity of those Gigafactories will come straight out of the market share of existing automotive companies. If they do not respond to the inevitable shift of consumers to electric vehicles in time, Tesla will have more time to eat up their market share. That clearly includes the market share of BMW, Audi, Mercedes, and Lexus, among others. Tesla estimating that it will build 10 to 20 Gigafactories is a statement that Tesla believes it will have to build at least 10 Gigafactories at the current pace before other manufacturers catch up. If they respond slower, which seems to be the case with every automotive manufacturer today with the exception of perhaps Chevrolet and its Bolt, Tesla would have an even larger head start in the transition to electric vehicles and would be able to build more factories before there were enough competition to saturate the market.

Battery Production

Diving into work currently underway for batteries, Elon shared that Gigafactory 1 is on track and will be able to produce more lithium-ion batteries than the rest of the world combined when it is at full capacity. This includes the capacity of all other EV manufacturers and clearly puts Tesla on top as having the highest capacity to produce the batteries required for serious volumes of EV production.

Said another way, even if another major automotive player wanted to roll into EVs with billions of dollars to work with, it would be constrained by the number of available batteries to purchase from all current sources. Tesla’s foresight to build battery capacity in advance of the demand was and continues to be a massive competitive advantage for the foreseeable future.

“We are maximizing economies of scale to get the lowest cost batteries possible.”

Tesla is pushing to have the most advanced batteries possible at the lowest cost. From his perspective, Elon shared that no one out there is close to doing the same thing because of the massive advantage in scale Tesla has and because of the advancements in battery technology Tesla has made with its battery (and now solar) partnership with Panasonic.

“There’s just no one else even attempting anything on this scale. That puts us in a very strong competitive position to sustain the company over the years to come.” “[The Gigafactory is] like a giant machine” that Tesla will continue to refine and optimize as it scales operations globally.

He also spent a good deal of time on safety. This is clearly in response to continued pressure from the United Auto Workers Union, which has been pushing workers to unionize. Elon shared that the safety rate at the Fremont factory is half that of the automotive industry globally and far better than competitive automotive factories in the US.

Tesla is moving from 2 shifts per day to 3 shifts per day to help reduce the number of safety incidents. It found that many injuries were happening at the end of shift when workers are the most tired and believes that this will help improve the safety of its workers. He stated that he is proud of the safety team at Tesla and because of their hard work, Tesla is making great progress towards being the safest manufacturing company in the world.

The Next Gigafactories

Tesla has massive plans to scale up with more Gigafactories around the world and is seriously considering 3 more locations at present. The overall plans for its rollout of Gigafactories is still being finalized. He had previously shared that Tesla would announce the location of the next 2–4 Gigafactories by the end of this year, so this statement is right in line.

Battery Upgrades

Elon shared that current Tesla owners can pay to upgrade their battery. He noted that it would be expensive but that it was something Tesla was looking to more officially support. To get the most out of the initial investment, owners should wait until the life of the battery has been run down before upgrading and it would still likely to be a better option to just sell the older Tesla and to buy a new one.

Speaking of older Teslas … Elon picked the scab off what sounded like a pet peeve of his. He shared that pre-owned Teslas will be rebranded as used Teslas on the website because that’s what they are. Tesla will give the used vehicle section more prominence on the website moving forward. With a used Model S coming in at around the same price as a new Model 3, but with availability right now, it is a good option for those who don’t want to wait for the Model 3.

Model Y

Tesla held its annual shareholder meeting on June 6th, 2017, at 2:30pm PST. The meeting included a summary of progress to date as well as a look into the future for the company. A key piece of that message focused on Model Y, which was initially planned to be a compact utility vehicle built on the platform for the Model 3. Elon shared that “We made a mistake designing Model X from the Model S platform,” which resulted in it being shoehorned onto a sub-optimized platform that required some concessions.

Based on that statement, it is clear that Model Y will not be built on the Model 3 platform and will require its own unique platform. This is further supported by Tesla’s decision to build Model Y in a completely new factory at a location that is still being determined. If Model 3 and Model Y were to share the same platform, it would make all the sense in the world to build it at the Fremont factory, since the first part of the production lines could be shared, which would make the production lines more efficient. Anyhow, though, the Fremont factory’s production capacity is apparently expected to max out before Model Y hits production.

Model Y will not be built at the Fremont factory, but it will still get its batteries from the Gigafactory. Elon was presumably referring to Gigafactory 1 in Nevada, so a location west of the Rocky Mountains is likely — though, by no means certain. “There is no way we could do Model Y at Fremont, so it will have to be somewhere else. We will have to transfer some of the things we do at Fremont to the Gigafactory just to do Model 3.”

With Model Y getting its own factory, one wonders how far along this new platform development process is and where Tesla will eventually produce it. Elon noted that Tesla should have just built a car from the car platform (Model S) and its first SUV (Model X) from the ground up like an SUV should be built.

Elon shared that Tesla expects demand for Model Y to exceed demand for Model 3. Model Y will arrive 2 years after Model 3, with Tesla “aiming for that to hit the roads in 2019, approximately.” The longer lead time is due to the note above that it will require a new platform and a new plant. Both of those require lead time that wasn’t in the cards when the plan was for Model Y to share a platform with Model 3 — an unfortunate but understandable date change.

Tesla shared a teaser of the car that suspiciously does not have any mirrors on it. With Model Y arriving presumably after Tesla has achieved legal approval for full self-driving vehicles, it is likely that this could mean that the car will not have a steering wheel either.

Elon dropped a massive hint that the Tesla Semi Truck reveal in late September would be more than just a Semi Truck unveiling.

“There are a few other things I haven’t mentioned here. I just really recommend showing up for the Semi Truck unveiling. Maybe there’s a little more than we’re saying here. Maybe. Could be. Who knows?”

This could be any number of things, but given the context around Model Y, it seems logical that the Model Y prototype might make an appearance.

Just as Tesla took the lessons learned from the overly complex Model X into account with the design of Model 3, Tesla is looking to step its game up yet again with Model Y. Tesla will continue to refine the manufacturing process and improve on the highly automated production of the Tesla Model 3. Tesla is also again looking to new territory — be on the lookout for another factory competition as well as more news about factory operational improvements. With Model Y, Tesla will be looking at reducing the complexity of the vehicle parts in its supply chain as well.

Elon noted that the supply chains for Tesla’s current vehicles span the globe. Parts are sourced from numerous countries across the planet. This means that an economic shakeup or natural disaster on the other side of the planet can impact Fremont’s ability to produce cars and adds unnecessary instability to the company. To mitigate this, Tesla is intentionally planning Model Y with that in mind. It will seek to minimize the complexity and geographical distance over which the supply chain is stretched, which may result in the location of the Model Y factory being somewhat of a surprise. Given the high number of automotive suppliers in Michigan, that could be a logical choice — though, it would require Tesla to ship batteries or rolling battery chassis from the Gigafactory in Nevada to Michigan … or perhaps the new Model Y factory could land somewhere in the middle.

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