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Tesla to build lithium-ion battery 'Gigafactory'

06 Mar 2014  | Paul Buckley

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Tesla Motors Inc. reveals its plan to build a lithium-ion battery plant, which the company claims would be able to manufacture more lithium-ion batteries in a year than were produced globally in 2013. Together with its partners, they would invest $4 billion to $5 billion in the said factory.

Tesla is aiming to raise $1.6 billion directly from investors to finance the plant. The company plans to raise the money by selling convertible senior notes, half of them due in 2019 and the other half in 2021.

Tesla has identified one of four states in Nevada, Arizona, New Mexico or Texas for the site of the company's "Gigafactory," which will help the EV maker reach its target of producing a competitively priced, mass-market electric car by 2017. Tesla said the plant will open in 2017 and ship batteries to the company's assembly plant near San Francisco.

The plant, which will handle everything from processing raw materials to final assembly, will produce small, lightweight batteries for Tesla and may also supply other automotive manufacturers.

The new factory will be designed to lower battery manufacturing costs by focusing material, cell, module and pack production to one location. The high cost of batteries has been identified as a major block to widespread electric car adoption.

Tesla's Chief Executive Elon Musk said the company expects to build the factory with more than one partner, but admitted that a "default assumption" was Panasonic, Tesla's existing battery cell affiliate "would continue to partner with us in the Gigafactory. The factory is really there to support the volume of the third generation car."

Each of Tesla's Model S sedan is powered by more than 7,000 lithium-ion battery cells, which are supplied by Panasonic. The battery cells are similar to those used in laptops but were jointly developed by Tesla and Panasonic specifically for electric vehicles.

In 2010, Panasonic invested $30 million in Tesla, and in 2011 the two companies agreed that Panasonic would provide Tesla with about 640 million automotive grade lithium-ion battery cells over the next four years. In October 2013, the scale of the supply deal was almost tripled to 1.8 billion cells.

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