Tesla Motor’s Elon Musk said the need for lower-cost batteries for autos and power storage means there will need to be hundreds of “gigafactories” like the one the carmaker is planning to build.
But for the time being Tesla Motors Inc. is narrowing its search for the much coveted and ballyhooed $5 billion electric battery factory down to a final pick within two or three months. “We are approaching a down-select stage in the process, which will likely see two locations emerge,” said Alexis Georgeson, a spokeswoman for the Palo Alto, California-based electric car maker.
Tesla wants to down-select two sites before it picks a final winner for the 10 million-square-foot plant. This should intensify the bidding war between the two remaining states.
The electric-car company based in Palo Alto, California, anticipates the battery factory will reduce the cost of lithium-ion cells by more than its initial guidance of 30 percent, Musk said when he spoke recently at the World Energy Innovation Forum, an annual conference hosted by Tesla board member Ira Ehrenpreis.
Tesla is getting close to deciding where it will build the first such proposed facility, which Musk has said will cost as much as $5 billion and involve partner companies such as Panasonic Corp. Last week he said groundbreaking at one of at least two potential sites could happen as early as June.
Along with supplying cheaper batteries for Tesla’s electric cars, the plant is to also supply stationary power storage devices to SolarCity Corp., another Musk-affiliated company. Those power storage devices will be needed by other solar power providers and to store wind power, he said, without identifying specific companies. Musk currently gets his batteries from Panasonic and an Asian supply chain.
Tucson, Pinal County, Buckeye, San Antonio, Reno, Albuquerque and California have all been in the mix for the Tesla plant. Tesla assembles its cars in Fremont and recently leased industrial space near Stockton.
The plant has been met by some Wall Street and supply skepticism and today was slapped with a junk credit rating by Standard & Poor. Reason given: “considerable uncertainty” about its long-term prospects.
The unsolicited B-ranking, six levels below investment grade, reflects a business “constrained by Tesla’s niche and independent market position,” S&P, the world’s largest credit-rating company, said Tuesday in a statement. “Palo Alto, California-based Tesla has a smaller scale relative to peers, a narrower product focus, and limited demand for its products, said S&P, which said its outlook on the rating is “stable.”
The youngest publicly traded U.S. automaker has tapped debt markets without a ranking from any of the major ratings companies, according to data compiled by Bloomberg. Tesla raised about $2.3 billion in March selling convertible debt to fund a battery factory to make more affordable models. “We believe there is considerable uncertainty in Tesla’s long-term prospects,” S&P analysts Nishit Madlani, Dan Picciotto and Joseph Lin wrote in the report. Compared with larger, more established automakers, the company is less likely “to successfully adapt to competitive and technological displacement risks over the medium to long term,” they said.
The gains in Tesla shares slowed this year after the company reported first quarter Model S sales this month that fell below top-of-the-range analyst estimates. Shares have risen 41 percent for the year to $211.56.