Gigafactory 1

History

Initial public mention of the gigafactory concept was made in November 2013, although Tesla's internal plans predated that; Tesla had investigated almost 100 sites.

In July 2014, it was announced that Panasonic had reached a basic agreement with Tesla to invest in a factory, estimated to cost $5 billion. The TRIC owners gave the first 1,000 acres to Tesla for free. The Reno site and plans were announced with Nevada officials on September 3, 2014. Panasonic will lead the battery cell production portion of the manufacturing, and Tesla CEO Elon Musk indicated in 2015 that the total Panasonic investment would be US$1.5–2 billion, and that Tesla would not expand beyond original plans. In early 2016 Panasonic president Kazuhiro Tsuga confirmed a planned total investment of about $1.6 billion by the company to equip the factory to full capacity. However, after the number of Model 3 reservations became known in April, Panasonic moved production plans forward and announced a bond sale for $3.86 billion, most of it to be invested in Gigafactory.

Tesla held a grand opening on July 29, 2016 of the operational facility, having only three of the final 21 "blocks" of the gigafactory built out, or approximately 14 percent of the final factory size expected by 2020. By September 2016 Tesla had spent $608 million on Gigafactory.

In October 2016, it was announced that Tesla would build motors and drive units at the Gigafactory, in addition to the previously announced batteries and assembled battery packs called Powerpacks.

Rationale

Tesla expects that Gigafactory 1 will reduce the production cost for their electric vehicle battery and Powerwall and Powerpack packs by 30%. Its projected capacity for 2018 is 50 GWh/yr of battery packs and its final capacity upon completion of entire factory is 150 GWh/yr. This would enable Tesla to produce 1,500,000 cars per year.

The factory is designed to optimize quality while minimizing cost of production and raw material utilization through vertical integration. Tesla expects to achieve a cost target for production battery packs of under US$100 per kWh of energy storage by 2020, near the "inflection point at which it begins [to cost] less to build an electric powertrain than [an internal combustion engine powertrain] even without subsidies or [considering] the savings of electricity vs. gas."

Gigafactory will produce batteries for significantly less cost using economies of scale, innovative manufacturing, reduction of waste, and the simple optimization of locating most manufacturing process under one roof.

Factory location

Tesla initially considered several sites, but Reno was not one of them. A manager at Reno–Tahoe International Airport offered some of its 3,000 available acres at Reno Stead Airport, and persuaded TRIC owner to split the bill for a private jet to fly Tesla people to Reno. Reno tried several times, and Tesla eventually came to TRIC and was pleased by the speed of regulatory work.

State competition and incentives

At least five states competed to attract Gigafactory by offering tax incentives, cash grants and other methods in the hope of future business; California, Arizona, Nevada, New Mexico, and Texas, where San Antonio had offered bigger incentives with no sales tax, but did not get the factory. States without sales tax were topping the list of preferred sites.

Nevada estimates a tax base of $1.9 billion over 20 years. After sticky negotiations, Tesla chose the Tahoe-Reno Industrial Center (TRIC) as the location of the Gigafactory mainly due to speed and a State of Nevada incentive package. These incentives include $195 million in transferable tax credits depending on Tesla's investment schedule and job creation, similar to the Volkswagen Chattanooga Assembly Plant deal and others. Tesla's investments earn them about $10 million in tax credits per quarter, and by July 2016 had sold these for $20 million cash. Other location reasons were rail access, direct sale ability, and low air humidity.

The incentive package also includes 20 years free from sales tax and 10 years free from property tax, depending on Tesla's ability to meet performance expectations (like investing $3.5 billion in Nevada). By 2034, this package could have accumulated to a value of $1.25 billion in missed taxes; the 10th largest in the US. The $725M sales tax abatement was particularly important, as 5 other states charge no sales tax at all and 34 states, including Arizona and Texas, don't charge sales tax on manufacturing equipment. With a tax base of $1.9 billion and an incentive package of $1.25 billion, the projected end result was calculated as a tax-per-abatement ratio of 1.52. The nearby data centers from Apple Inc. and Switch also received incentives.

Nevada estimates the construction impact at $2.4 billion and the economic impact from the project at $100 billion over two decades ($5 billion/year, of which $353 million are wages). Some economists said that number was "deeply flawed", for instance, it counted every Tesla employee as if they would otherwise have been unemployed and made no allowance for increased government spending to serve the influx of thousands of local residents. Tesla agreed to pay $7.5M per year for 5 years ($37.5M) to the school system.

Logistics

The 6-mile Nevada State Route 439/USA Parkway was built by TRIC, and connects TRIC to Interstate 80. Since 2004, the TRIC owners had planned to extend SR 439 south to US 50 – Carson City, Fallon. In 2014, Nevada Department of Transportation advanced the otherwise dormant south extension. This improves traffic conditions for the many large logistics centres at TRIC and Gigafactory, bypassing Reno on the way to U.S. Route 50. Tesla plans to ship batteries by rail to its car factory in Fremont.

Water is scarce in Nevada, and some of the water for the Gigafactory is piped from a treatment plant in the neighboring Washoe County. A 1.5 million U.S. gallons (5.7 million L) water tank is also used (about two Olympic-size swimming pools).

TRIC built high-pressure natural gas lines to its sites, but Tesla decided to use electricity and not connect natural gas to Gigafactory. Heat pump technology is used for heating, and a $6.8 million energy storage tank is scheduled for the site. In 2014 Navigant estimated 100 MW electricity delivery which could be supplied (on average) by nearby wind turbines and roof solar panels, whereas a former Tesla logistics manager in 2016 estimated 300 MW to produce 35 GWh of battery capacity per year.

Tesla works with a mining company to extract lithium 200 miles (320 km) to the southeast, at Silver Peak in Esmeralda County. They intend to process the underground brine water industrially over hours rather than the traditional way of letting the water evaporate from ponds over a year.

Construction

Tesla had already started brush clearing and grading during the summer of 2014 (prior to official announcement in September; permit date was June 26), with vertical construction reported in January 2015. Tesla and its partners intend to complete the facility by 2018. On March 18, 2016 a group of journalists were allowed to visit the Gigafactory under strict conditions and found that 14% of the final building area had been completed. By April 2016 there were around 600 construction workers. Depending on season and building stage, the number of construction workers has fluctuated between 250 and 1,800. On June 13, 2016, Tesla filed for a $63m expansion into section E on the site. By September 2016, the building had grown to 1.9 million sq ft (0.2 million m²) with further areas under construction. As of January 2017 the building's footprint is 1.9 million sq ft (0.2 million m²) with 4.9 million sq ft (0.5 million m²) of usable area across several floors. A combined permit value of $322,568,793 was registered in July 2016, and $477m in November 2016. Gigafactory and the other large companies affect the local area by increased needs in transportation (SR 439) and housing; house prices increased by 17% in 2015 from half of the peak in the previous 2008 building bubble. Local businesses were wary of building new homes, which is being done mostly by out-of-state companies.

HVAC equipment is located "between the floors rather than on walls and ceilings of a floor." All steel is from the US. Tesla is its own contractor on the project, learning how to build other factories should they choose so.

Future expansion

Prior to the building of more gigafactories (see below), Tesla may expand and potentially double the size of Gigafactory 1. In June 2015, Tesla announced it exercised its option to buy 1,864 acres (754 hectares) of land adjacent to the original 1,000-acre (400 ha) Gigafactory site. Tesla spokeswoman Alexis Georgeson. "The purchase gives us the opportunity for future growth." In Tesla's dealings with the state of Nevada expanding the size was always an option should the company choose to do so, said Steve Hill, director of the Governor's Office of Economic Development. "Tesla had said that the factory will be up to 10 million square feet [1 million square meters] in one or two stories," Hill said. "On the earnings call (in May 2015), Elon said they aren't yet committing to this but that they are considering increasing the size of the gigafactory here by 50 to 100 percent."

Early estimates from 2014 projected that the factory would employ approximately 6,500 people by 2022, requiring at least half of them to be Nevadans.

Operations

Tesla owns the land and building, and leases part of the building to Panasonic, which owns some of the cell production equipment. The gigafactory is operated by a management team under executive Jens Peter Clausen, formerly a LEGO executive, who is VP of Gigafactory at Tesla. By April 2016 Gigafactory had 317 Tesla employees and 52 by Panasonic, most of them from Nevada, and 850 by December 2016.

Production

The factory is intended to gradually provide cradle-to-cradle handling of batteries, from raw material over components to finished products, and recycling old batteries into new. Cells constitute most of the value creation, whereas packing and electronics are minor parts. Tesla views production as more important than products, and assigns more engineers to developing production equipment than to developing products.

Cell level

The basis of the energy storage system of Tesla products are lithium-ion cells in the 18650 form factor. These cylindrical cells have a diameter of 18 mm and are 65 mm in length, a size used for the batteries of laptops. Cylindrical cells are generally less expensive (costing 190–200 dollars per kWh as of 2014) than large format cells whose active layers are stacked or folded (approximately 240–250 dollars per kWh).

The battery cells produced at the Gigafactory are of a new form factor, larger than the 18650 cells used in the Model S and Model X automobiles. While the cells were originally expected to be at least 20 mm in diameter and 70 mm in length, revised specifications for the optimized form factor are 21 mm (0.83 in) by 70 mm (2.8 in). Tesla thus refers to it as the '21-70', whereas Samsung refer to the size as '21700'. Panasonic is expected to begin cell production in 2016, and continue for at least 10 years. Only Panasonic cells are to be used in the Model 3. Among the machines spotted at the opening in July 2016 were presses and rollers for cathodes. Gigafactory began mass production of the 2170 in January 2017.

Product level

In October 2015, Tesla moved the Tesla Powerwall and Powerpack production from its Fremont factory to the Gigafactory. The Tesla Powerwall has been produced in the finished portion since the third quarter of 2015.

Output goals

As of 2014, the projected capacity of Gigafactory for 2020 was to have been 35 gigawatt-hours per year of cells as well as 50 GWh/yr of battery packs. Production could be equivalent of supplying 500,000 Tesla cars per year. When finished, the factory is planned to produce more lithium ion batteries in a year than were produced in the entire world in 2013.

Future Gigafactories

On April 30, 2015, Elon Musk announced that the factory heretofore known simply as the Gigafactory was now to be known as Gigafactory 1 as Tesla plans to build more such factories in the future. At the same event, Musk also said that he believed that other companies would build their own similar "Gigafactories". After receiving $800M of orders ($179M PowerWall, $625M PowerPack) within 1 week of unveiling, Musk estimated that the Gigafactory 1 is not enough to supply demand.

In November 2016, Elon Musk stated his intention that 'Gigafactory 2' would be located in Europe and manufacture both batteries and complete cars in a location to be chosen in 2017.

October 2015 - Journalist trespassing

In October 2015, an altercation between Tesla security staff and two Reno Gazette-Journal journalists occurred when the former responded to a report of photographer Jose Andrews Barron and reporter Jason Hidalgo taking pictures of the factory. While neither Tesla nor the Gazette-Journal dispute Mr. Barron and Mr. Hidalgo being at the site and confronted by Tesla security, the parties do disagree somewhat on what happened subsequently. Tesla alleges that after being confronted, the journalists refused requests to provide their names and IDs and further denied having trespassed despite obviously having passed through a security fence clearly adorned with 'private property' signs. When asked to wait for the authorities, the journalists entered their vehicle and in attempting to leave the scene, allegedly struck several Tesla security employees and a Tesla security ATV. The Gazette-Journal's version alleges that Tesla attempted to actually detain one or both journalists who then had to 'escape' and in doing so may have, because of having to escape, struck one or more Tesla security employees and the aforementioned ATV. In any event, the incident ended with the Sheriff arresting Mr. Barron and charging him with felony battery and trespassing. He was released later that evening on $30,000 bail. The felony charges were later dropped in favor of three misdemeanor counts (two for battery and one for trespassing) and set for pre-trial on Feb 4, 2016. Mr. Hidalgo ended up paying a $195 fine for trespassing.