Overcapacity at Gigafactory Could Boost Stationary Energy Storage

September 4, 2014 By Linda Hardesty

lux energy manageTesla Motors’ plan to build a 35 GWh lithium-ion cell production facility – dubbed the Gigafactory – for electric vehicles will bring about only a modest reduction in battery costs and create significant overcapacity, predicts Lux Research.

Tesla and its partner, Panasonic, will contribute about 45 percent and 35 percent, respectively, of the initial $4 billion required to build the Gigafactory, proposed to go online in 2017. But an analysis by Lux projects sales of only 240,000 cars in 2020 instead of the goal of 500,000 cars, leading to razor-thin margins for Panasonic and 57 percent overcapacity.

Lux’s report “The Tesla-Panasonic Battery Gigafactory: Analysis of Li-ion Cost Trends, EV Price Reduction, and Capacity Utilization,” says the Gigafactory won’t reduce battery prices enough for plug-in cars to break beyond their current niche. The OEMs backing the US Advanced Battery Consortium are targeting $125/kWh by 2020 – more than four times lower than $520/kWh, the price Ford paid for its Focus EV battery packs. Currently, Tesla has the lowest cost – about $274/kWh, according to Lux’s analysis. Tesla founder Elon Musk aims to cut costs by 30 percent, on the strength of scale, location and technology, lowering the price to $196/kWh.

Lux’s report says the Gigafactory, proposed to be built at a cost of $5 billion, is designed to make 35 GWh Li-ion cells for half a million EVs. But in the likely event of much lower sales of 240,000, overcapacity will be to the extent of 20 GWh, which could be used for stationary battery packs.

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