Tesla May Announce Four New 'Gigafactories' This Year

Tesla could build as many as four new "Gigafactory" battery-manufacturing facilities, according to Elon Musk.

Tesla

Tesla's Nevada "Gigafactory" is already billed as the largest lithium-ion battery cell manufacturing facility in the world, and is one of the biggest projects Tesla has ever undertaken. But CEO Elon Musk isn't satisfied with just one of these massive factories.

In a shareholder letter earlier this year, Tesla said it would announce two or three more Gigafactories later this year. But during an interview at a TED conference last week, Musk said Tesla could announce as many as four new battery factories.

"I will announce locations for between two and four Gigafactories later this year—probably four," Musk said.

Regarding locations for the factories, Musk said that Tesla "needs to address a global market." China and Europe seem like logical candidates, given their importance as markets for new cars in general and electric cars in particular. Tesla may run into regulatory issues in China, which currently requires foreign automakers to partner with local firms on factories that build cars. It's unclear how the Chinese government would respond to Tesla building a battery factory in the country.

Late last year, the Finnish city of Vaasa announced that it would court Tesla as a possible Gigafactory location. Vaasa believes the factory could be a major economic engine; its pitch to Tesla rests primarily on the fact that the city is located near Europe's largest lithium deposits. The city also claimed to have a large pool of potential employees with relevant experience, as well as support services.

If Tesla really does go through with plans for four Gigafactories it would be beyond ambitious: the current Gigafactory is already putting a lot of pressure on the company. Tesla is relying on the economies of scale offered by such a large factory to produce lithium-ion battery cells cheap enough to achieve a $35,000 base price for its 215-mile Model 3. Production of that car is set to start in July, and Tesla already has hundreds of thousands of reservations for it.

The Model 3, in turn, is how Tesla expects to meet Musk's goal of producing 500,000 cars per year by next year. The Model S and Model X are simply too expensive to achieve those sales volumes. The promise of Tesla vastly expanding its volumes and taking a step closer to becoming a mainstream automaker has buoyed the company's stock prices, allowing it to overtake Ford and rival General Motors in value over the past month even amid continued financial losses.

Building more Gigafactories would allow Tesla to massively grow its production volumes, but those facilities would also require a major infusion of cash. Tesla is already spending plenty while still failing to turn a profit consistently. Any issues with ramping up production at any of the Gigafactories will only delay the shift from spending money to (potentially) making it.