Tesla Model S

Tesla Model S

The Tesla Model S At The 2014 NAIAS

The Tesla Model S At The 2014 NAIAS

There's been much discussion as of late focused on Tesla's battery giga factory.  Some say the idea is too big for even Tesla to pull off.  While others believe Tesla can't move forward to Gen 3 without the giga factory.

Oftentimes, the discussion centers on getting down costs, as in without the giga factory, Gen 3 would be too expensive, but there are often-overlooked reasons why Tesla need this battery factory:

Steady, consistent and reliable supply: 

Without the giga factory, Tesla is at the mercy of Panasonic's ability to keep pace.  Panasonic itself has struggled financially in recent years and prior to the Tesla deal, Panasonic seemed to be nearing the brink of failure.  At present, Tesla would possibly fail if Panasonic did.  This is not a situation Tesla Motors wants to be in.

Other source of revenue: 

In theory, once the giga factory is up to capacity, Tesla could sell cells to other battery assemblers or sell completed battery packs to automakers, energy storage companies and so on.  This could be highly lucrative for Tesla Motors.

Research and development:

Currently, Tesla relies on Panasonic to push the envelope.  Panasonic research and development budget dictates how much money goes towards advancement of battery technology.  With the giga factory, Tesla would have its own battery research and development division and we're certain Tesla would pour a significant amount of money into it.

We realize this is not an exhaustive list.  There are reasons both for and against the Tesla battery giga factory.  However, it needs to be pointed out that driving down costs is not the sole reason for the giga factory.  As a matter of fact, that's probably low on Tesla's priority list for the giga factory.  More important is, without a doubt, steady supply.  Then perhaps more revenue.  Then future battery tech.  And somewhere is the mix is driving down costs.

At least that's the way we see it.