The Tesla-Panasonic Battery Gigafactory: Analysis of Li-ion Cost Trends, EV Price Reduction, and Capacity Utilization

August 13, 2014 | State of the Market Report

Tesla Motors has found initial success in the luxury electric vehicle market, and will look to capitalize on that momentum through aggressive expansion, planning a new 35 GWh lithium-ion (Li-ion) cell production facility. Dubbed the “Gigafactory,” it poses a tremendous risk for Tesla and its partner Panasonic, and herein we analyze whether the $5 billion investment is justified by electric vehicle (EV) sales volumes and the interrelated question of breaking through the price floor for Li-ion batteries. We find the Gigafactory will only reduce the Tesla Model 3’s cost by $2,800, not enough to truly influence whether this lower-cost EV will be a success or not. Moreover, our analysis indicates that in the likely case of Tesla selling 240,000 EVs in 2020, its partner Panasonic will be risking low margins, and the Gigafactory will be running at significant overcapacity, which other carmakers and stationary applications are unlikely to offset.

Coverage Areas

  • Owning the Energy Transition
  • The Future of Mobility

Table of Contents

  • Landscape
  • Analysis
  • Outlook

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