Tesla Motors Inc (NASDAQ:TSLA) plans to grab raw material only from North America to manufacture 500,000 battery packs each year for its electric cars. The EV manufacturer will do so to bring down pollution levels, and the savings will be passed on to the buyers.

Tesla

In an email to Bloomberg, Tesla said, “It will enable us to establish a supply chain that is local and focused on minimizing environmental impact while significantly reducing battery costs.”

Tesla sees benefits in sourcing material domestically

Raw materials that Tesla Motors Inc (NASDAQ:TSLA) will acquire from companies having their origin in the United States and Canada include graphite, cobalt, and lithium among others required in manufacturing electric car batteries, in its $5 billion ‘gigfactory.’

The car manufacturer stated that using domestic raw materials in the gigafactory would slash the cost of battery packs by more than 30%. Production would also increase, and the low cost will make it possible for the company to make an affordable 200 mile car by 2017.

A few days back, China shuttered its graphite mines to cut down on pollution. At present, China produces around three-quarters of the world’s graphite. Supply from China is presently risky owing to the measures from authorities to address the concern of rising pollution. Therefore, this move from Tesla Motors Inc (NASDAQ:TSLA) to source the material from the U.S. is completely reasonable.

Model E half the price of Model S

Musk said that after the launch of the Model X the company will be gearing up to unveil a smaller car than Model S, priced at almost half of the Model S with a 200-mile usable range. The battery pack is also expected to be 20% smaller around 48kWh pack. The smaller battery would bring down the price of the car substantially, but other features like vertical integration and clever design solutions will also determine the success of Model E. The $4.5 billion ‘gigafactory’ is expected to help the company in shipping 500,000 packs per year to Tesla’s final assembly plant in Fremont, California.

In an interview at the California Public Utilities Commission last month, Tesla Motors Inc (NASDAQ:TSLA) CEO Elon Musk said that the 2017 Model X would be 20% smaller than the Model S. If the vision turns into reality, then the $35,000 Tesla Model E will be a substantially smaller car than the latest BMW 3 series, the Volkswagen Jetta and also the new Audi A3 sedan.