In the middle of the desert, just at the foot of the Sierra Nevada mountains, east of Sparks, Nevada, over 1,000 workers are constructing what will eventually become the largest building in the world in terms of its footprint on the ground.
This building, dubbed the Gigafactory, is where electric car manufacturer Tesla is planning to pump out enough lithium-ion batteries to propel the company’s electric vehicles into the mainstream.
When completed, the building will cover around 5.8 million square feet. If everything goes according to plan, the massive factory will be finished in 2020.
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At the time of writing, the construction progress has finished almost 2 million square feet of space on several floors. Staggeringly, the construction is only about 14% complete.
“I think the Gigafactory has to be the most exciting factory in the world,” Tesla CEO Elon Musk said of the project.
When finished, the Gigafactory will be an absolutely mind-boggling feat of engineering and construction, and will play a significant role as to Tesla’s position in the future of electric vehicles.
Tesla to focus on lithium-ion battery production
Tesla broke ground on the Gigafactory a little over two years ago, and the factory intends to address the company’s most pressing issue: high-volume production of lithium-ion batteries. The Gigafactory’s main purpose is to ease production constraints for lithium-ion batteries and, in turn, rapidly increase production levels of Tesla vehicles ahead of an anticipated boost in vehicle production.
Riding the projected production increase of the company’s upcoming lowest-cost vehicle yet, the Model 3, the company expects production to increase from around 50,000 vehicles in 2015 to about 500,000 vehicles annually by the end of 2018.
However, the factory won’t be only for the production of vehicle batteries, as Tesla intends to produce batteries for its growing energy storage business. Tesla has already begun production on battery production for its Powerpack and Powerwall energy storage products.
By producing its own batteries, Tesla hopes to reduce production costs significantly. Since Tesla first announced the Gigafactory, the company hoped to achieve a 30% cost reduction for its batteries by 2020. However, as of yesterday, Tesla said that it expects to have driven this cost production down 30% by 2018, two years earlier than planned. These lower costs will be driven by unprecedented economies of scale and by vertically integrated production.
Gigafactory the key to Tesla’s future
When completed, the Gigafactory will be the largest building in the world by footprint, at 5.8 million square feet, or 107 football fields. The current structure stands at a mere 800,000 square-foot footprint, and almost 2 million square feet when including entire operational space on different floors.
According to Musk, the factory will be able to produce enough lithium-ion batteries for 1.5 million vehicles per year, which is about three times more that Tesla’s initial prediction. “This is made possible by aggressive factory design, density, and manufacturing efficiencies,” a Tesla press release reads.
Just the beginning for the Gigafactory
Despite being only 14% completed, production of batteries has already begun in the Gigafactory, and cell production is only weeks away.
Tesla plans to implement an “unorthodox business strategy of just-in-time construction, building the factory, tooling it, and completing production in phases. The factory is built in phases so that we can begin manufacturing immediately inside the finished portions, thereby minimizing delays,” Tesla stated in a press release.
Beyond the already-completed portions of the Gigafactory, “areas under construction at the South end of the factory add up to 2.5 million square feet and will house even more cell manufacturing. In less than one year, these sections will be complete and producing cells.”
Construction also recently began on the North end of the Gigafactory, which will add almost another one million square feet and will “house additional module and pack production and manufacturing to support Model 3,” the company stated.
Vertical integration a priority
Beyond streamlining production, Tesla hopes to vertically integrate its entire process of constructing lithium-ion batteries, part of the company’s plan since the beginning.
After Tesla first announced the Gigafactory, Musk explained that “You’ll have stuff coming directly from the mine, getting on a rail car and getting delivered to the factory, with finished battery packs coming out the other side.” Through this process of bringing all steps of construction under one roof, the company hopes to drastically reduce costs and create an efficient supply.
Focus to shift to Model 3 soon
Currently, the Gigafactory is being used primarily from production of energy storage products like the Powerwall and Powerpack. However, batteries for the company’s upcoming Model 3 will soon become the primary focus of the factory.
The Model 3 generated almost 400,000 deposit-backed reservations earlier this year, and in order to produce enough batteries to back up the sales of this vehicle, the factory will soon need to shift its focus of production. On Tuesday, Musk said he believed that Model 3 sales could potentially generate up to $20 billion in annual revenue for Tesla.
Musk has said that he believes the Gigafactory will be able to finish the first battery packs for the Model 3 in around eight to nine months.
While Tesla has certainly made progress since breaking ground, there is still much to be done. The Gigafactory is an example of the company’s massive expectations for its vehicles and energy storage business, though it also shows the risk in the company’s incredibly ambitious plans.
While many may doubt the future for electric vehicles and energy storage, the Gigafactory is testament to the company’s supreme confidence in its future.