Tesla digs, but isn't sold on Reno

Musk: Laying the groundwork
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Tesla Motors Inc. hasn’t decided on a site for its so-called gigafactory, but it’s moving forward as though it has.

The company broke ground in June on a site near Reno, Nev., that “could potentially” be the location for the gigafactory, the up to $5 billion, large-scale battery plant that Tesla plans to run with its battery supplier, Panasonic Corp.

CEO Elon Musk said during the company’s second-quarter earnings conference call on Thursday that the construction pad needed to build the gigafactory at the site near Reno is essentially complete.

But locating the plant there isn’t a done deal, he insisted. Tesla is still evaluating sites in California, Arizona, New Mexico and Texas, and Musk said the company will do similar site preparations in “one or two” other states. A final decision will be made in the “next few months,” the company said.

So what gives?

Musk said Tesla is laying the groundwork to begin plant construction quickly once it finds the best site and state incentive package, rather than waiting for the details to be ironed out. It’s a bet that the long-term cost savings of a gigafactory in an ideal location with ideal incentives will make up for any near-term duplicate costs of preparing sites for construction.

“It made sense to have multiple things going in parallel. Before we actually got to the next stage of pouring a lot of concrete, we want to make sure that we have things sorted out at the state level — that the incentives are there that make sense and that are fair to both the state and to Tesla,” Musk said during the call, emphasizing that the incentives must be fair for the state, not just advantageous for Tesla.

“At this point, the ball is in the court of the governor and the state legislature,” Musk said.

Tesla’s confirmation that it had broken ground near Reno was just one piece of a flurry of news about the gigafactory on Thursday. Tesla and Panasonic said that morning they would cooperate to build and run the gigafactory. Under the plan, Panasonic would install equipment and make the next-generation lithium ion battery cells at the plant, while Tesla would provide and manage the land and buildings and assemble the cells into battery packs.

Of the initial $4 billion, Musk said about 40 to 50 percent would come from Tesla, 30 to 40 percent from Panasonic and 10 percent from state incentives. Another 10 to 15 percent would come from other suppliers and partners at the site.

The gigafactory details came as Tesla said that it posted a $62 million net loss in the second quarter, more than double its losses in the year-earlier period, amid a major run-up in r&d costs. Record second-quarter deliveries of the Model S sedan sent revenue soaring 90 percent to $769 million.

You can reach Ryan Beene at rbeene@crain.com. -- Follow Ryan on Twitter


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