Gigafactory Case Analysis

The major problems of today’s electric cars are definitely range and high price, which primarily results from high producing costs of battery pack. As Elon Musk said, it is not a big problem to build a fully electric car with a long range, but it is extremely difficult to mass produce it, so it can be “affordable” in a way. The high costs of batteries and the ineffective battery technology were limiting their driving range, because the car had to be affordable. That’s why established automakers couldn’t bring to the market mass produced, affordable, fully electric car with long driving range. [Source 1] [Source 2] However, this is where Tesla made a difference. Thanks to their innovative battery and charging technology, they are able to produce …show more content…
[Source 2] The Gigafactory is simply about reducing cost per kilowatt hour really drastically. Once the Gigafactory reaches its full production capacity, Tesla’s goal is to reduce the cost per kilowatt hour by more than 30%. As Elon said, “It’s taking economy of scale as far as we can possibly imagine, to a very extreme level.” [Source 1]

Taking this risky step, building the Gigafactory, is a key factor for success in bringing a mass produced electric car on the market, success of Elon’s “Master Plan” and basically also for success of Tesla Motors itself. They expect to begin cell production in 2017 and according to Tesla, "by 2020, the Gigafactory will reach full capacity and produce more lithium ion batteries annually than were produced worldwide in 2013" thanks to the planned annual battery production capacity of 35 gigawatt-hours. [Source