Why Tesla Really Needs a Gigafactory

Hodejo1 (1252120) writes "Tesla has already put over 25,000 cars on the road with more to come and, presumably, most will still be running well past the 8-year battery warranty. What would happen if it is time to replace the battery pack on an old Model S or X and the cost is $25K? Simple, it would destroy the resale value of said cars, which would negatively affect the lease value of new Tesla automobiles. That's a big part of the real reason why Tesla is building its own battery factory. They not only need to ensure enough supply for new cars, but they have to dramatically bring down the price of the replacement batteries low enough so owners of otherwise perfectly running old Teslas don't just junk them. The Tesla Roadster was not a mass produced vehicle, so the cost of replacing its battery is $40K. The economies of scale of a gigafactory alone will drop battery costs dramatically. Heavy research could drop it further over the next decade or so."

Comments

Re:Does the math work out?

[Travis Mansbridge]

Expanding to related industries to lower internal costs is known as vertical integration and has been making industrialists rich for over a century.

Re:volume

[TrekkieGod]

Their factory will only "drop battery costs dramatically" if it runs at full capacity. Its capacity is about 500,000 cars per year, while Telsa has only sold 25,000 cars in total.

The factory isn't for Tesla vehicles only. Tesla and Panasonic (the factory is a join venture) intend to supply other electric vehicle manufacturers with cheaper batteries. So the potential market is much greater.