Study challenges Tesla's Gigafactory figures, predicts battery overcapacity

September 03, 2014 // By Christoph Hammerschmidt
Tesla Motors' CEO Elon Musk uses to impress the world with bold visions and ideas, and his recently announced plans to build and run a huge factory for traction batteries for electric vehicles gave an impression of the mindset of a man for whom the sky is the limit. But now technology consultant company Lux Research presents a study that makes Musk's plans appear flimsily planned.

The giant lithium-ion production facility, designed to supply an increasing market volume of electrical cars with energy storage that Musk intends to establish along with his technology partner Panasonic will fail to achieve a significant effect on battery prices - and it will create a massive overcapacity, says Lux Research analyst Cosmin Laslau. Despite its massive capacity of 35 GWh, the Gigafactory will effect only a minor reduction in battery costs. The high price of today's electric vehicles is one of the most essential obstacles against the acceptance of electric vehicles in the large scale. Instead of exerting significant pressure on the market price for the batteries which in turn would enable Tesla to offer their vehicles at more affordable prices, the Gigafactory production will cut the price of the battery only by $2,800 which not overly impressive, given an estimated battery price of about $30,000 per vehicle. And instead of working profitable or at least at break even, it must be assumed that the factory will produce red figures in the first place, since Lux Research predicts an overcapacity of 50% or more.

The reason is, according to Laslau, that Tesla won't reach the intended sales figures. While tesla plans to sell half a million vehicles in 2020, Lux Research believes that the sales figures will rather get stuck at about 240,000 units. "The Gigafactory will only reduce the tesla Model 3's cost by $2,800 - not enough to sway the success of the planned lower-cost electric vehicle," the commented Laslau.

While the analyst and lead author of a study about this topic attests Musk to be on the right way with his goal of cutting the costs for traction batteries, be believes that the Gigafactory does not enough. In order to break out of their current niche, EVs need to become dramatically more affordable, and this can only be done by reducing the price of the batteries. Currently,