Tesla Gigafactory Construction Costs Now Exceed $1 Billion

9 months ago by Steven Loveday 39

Tesla Gigafactory expansion continues (December progress shown via YT/Matthew Roberts)

Tesla Gigafactory expansion continues (December progress shown via YT/Matthew Roberts)

We have checked in with Jack Cookson of BuildZoom from time to time, as he provides information about building permits related to the Tesla Gigafactory. According to Cookson today, Tesla has now surpassed the one billion dollar mark, if you add up the cost of all 153 permits thus far. Simply obtaining the permits alone has cost Tesla over $5.5 million.

Production Of 2170 Battery Cells At Tesla Gigafactory

Actual production Of 2170 Battery Cells At Tesla’s Gigafactory is underway today!

Just six months back, BuildZoom had the total earmarked at $386 million. Three months later, the total had escalated to near a half billion dollars and 130 permits. This all makes it pretty clear that the last 23 permits must have some substantial value.

Truth told, one permit accounts for $404 million of the grand total. The permit specifically applies to the massive additions added to the D and E sections of the Tesla Gigafactory. This work is visible in the picture above, from the flyover in December. The more interesting part is that this work, which accounts for about 40 percent of the monetary total, is considered an “addendum” to Tesla’s original plan. It only makes sense that this is related to the fact that Elon Musk announced Tesla’s “new” plans to manufacture Model 3 drivetrains and motors at the Gigafactory.

Changes to Gigafactory permits via BuildZoom/Jack Cookson

Despite all of this, and the brisk pace of construction, the Tesla Gigafactory is only about 30 percent complete. A Tesla spokesperson shared:

“Already, the current structure has a footprint of 1.9 million square feet, which houses 4.9 million square feet of operational space across several floors. We are still less than 30 percent done. Once complete, we expect the Gigafactory to be the biggest building in the world.”

The current total usable space is just shy of that of Tesla’s 5.3 million square-foot Fremont Factory, which has arguably the largest footprint of any building on the planet. Boeing’s Everett Factory has a smaller footprint, but boasts about twice the volume of any other building on Earth. In terms of floor space, it will be awhile before the Tesla Gigafactory can match the 18.9 million square-foot New Century Global Center in China, but at this rate, it’s highly feasible.

Source: Teslarati, Buildzoom

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39 responses to "Tesla Gigafactory Construction Costs Now Exceed $1 Billion"

  1. Sublime says:

    Suggested title change:
    “GigaFactory now exceeds GigaDollars”

  2. Ocean Railroader says:

    It’s good that they built this giant building in a barren desert to avoid them having to know down tens of thousands of trees to make room for this monster building.

    I always picture the Gigia Factory being like the Death Star to Oil Demand.

    1. Ash09 says:

      It also helps that Nevada offered a lot of tax breaks for them to entice them to build there and hire Nevadans to work there.

      And I think it was mostly because this site is pretty close to the Fremont factory, reducing transportation costs and speeding up deliveries between the two factories.

    2. speculawyer says:

      That desert will also be a great place for rooftops covered with solar PV and the hills will be filled with wind turbines.

      The dream is becoming real.

      1. Nope. Solarcity exited Nevada after net metering was abolished.
        My speculation is that Solarcity business is being folded down quickly.

        1. wavelet says:

          Whether or not Nevada is a good market for SolarCity’s business model is unrelated to whether it makes sense for the Gigafactory to generate a significant % of its energy needs from solar PV.

          It’s a pretty big factory, and Nevada had pretty high insolation — quite possibly generating (a good deal of — no idea what %) their own energy is cheaper than buying it off the local utility.

        2. ffbj says:

          We have missed your words of wisdom. Oh wait, there never were any to begin with.

  3. ¯\_(ツ)_/¯ sven says:

    Before anyone says the billion dollars in construction costs that Tesla spent on the Gigafactory is the reason why Tesla is posting net losses and why it’s not profitable, virtually every dollar of that one billion is NOT an expense that shows up on Tesla’s income statement. The entire one billion dollar expenditure goes on Tesla’s balance sheet as depreciable assets (Property, Plant, and Equipment), which affects cash flow and NOT profit/loss (income/expense). Once these depreciable assets are placed in service, only then can Telsa take an annual depreciation expense over many years on its income statement, which would reduce net income or increase net loss each year over the life of the depreciable asset.

    Bottom line, an expenditure can either go on the income statement as an expense, or it can go on the balance sheet as a depreciable asset (non-depreciable asset if it is land).

    1. Nix says:

      The Gigafactory was placed into service last year, building Tesla Powerwall 2 units.

      1. Ambulator says:

        Some was, but the main point is that only a small part of the cost is seen each year.

        1. Nix says:

          But it is not just the Gigafactory, it has been everything throughout the years invested in growing the company. People like this guy pretend that not a single penny of that investment into Tesla’s future contribute to pushing TSLA negative.

          On top of that, they ignore all the Value (Wealth) that has been created by Tesla, and only look at cash-flow. As if cash-flow were the singular and only measure of a growth company, when it isn’t.

          Elon Musk himself has stated outright that TSLA will go negative due to Model 3 investment costs until the M3 goes into volume production. Yet these guys keep insisting that Tesla’s investment in their own future has zero impact. Those memes need to die.

          1. ¯\_(ツ)_/¯ sven says:

            Nix said:
            “People like this guy pretend that not a single penny of that investment into Tesla’s future contribute to pushing TSLA negative.”

            Not true. I said the following:
            “Once these depreciable assets are placed in service, only then can Telsa take an annual depreciation expense over many years on its income statement, which would reduce net income or increase net loss each year over the life of the depreciable asset.”

            Nix, why don’t you ever correct your friend Pu-Pu, who in the comment below said:

            “The only reason they don’t have a net profit is because they keep investing more money in future growth than they are currently making in profits.”

            Doesn’t Pu-Pu’s false meme need to die? If not, are you here just to pump up Telsa’s stock?

            1. Nix says:

              I was referring to the entire meme itself, pushed by many people, not your specific post, and how the meme should die.

              1. Nix says:

                If I were referring to you I would have said “sven and people like him”, not “people like this guy”.

                Let me know if I need to draw a venn diagram.

                1. ¯\_(ツ)_/¯ sven says:

                  No, you need to draw a svenn diagram: ¯\_(ツ)_/¯

    2. Pushmi-Pullyu says:

      “…the reason why Tesla is posting net losses and why it’s not profitable…”

      All of you anti-Tesla FUDsters like to mischaracterize it this way, because it fits your short-selling propaganda.

      Investments in future growth are not “losses”, any more than you putting money into your IRA retirement account is a “loss”.

      And Tesla has a fatter gross profit margin than most auto makers do. The only reason they don’t have a net profit is because they keep investing more money in future growth than they are currently making in profits.

      This is the same situation as happened just a few years ago with Amazon.com, with financial analysts stupidly insisting Amazon.com was “losing money” while growing to be the world’s #1 retailer.

      One does not have to be a financial genius to see that Tesla keeps growing, keeps expanding its market, and keeps installing new infrastructure every year. That’s the sign of a very successful company.

      Anybody who, like me, isn’t a Tesla investor (long or short), can safely ignore all the bean-counter arguments over exactly how Tesla’s money should or should not be counted. That is every bit as pointless as arguing over how many angels can dance on the head of a pin.

      1. ¯\_(ツ)_/¯ sven says:

        Pu-Pu said:
        “The only reason they don’t have a net profit is because they keep investing more money in future growth than they are currently making in profits.”

        You are dense. Read my original comment again.

        And no, Tesla is not same situation as Amazon. IIRC, Amazon had only one additional capital raise after their IPO, which means they financed their expansion with positive internal cash flow. Amazon was “losing money” (showing a net loss) because it was undercutting the brick and mortar stores and online retailers on price in order to expand market share and drive its competitors out of business.

        1. Pushmi-Pullyu says:

          I’ll certainly agree that automobile manufacturing takes a much bigger capital investment than building Amazon.com’s distribution centers. Other than that, I don’t see a lot of difference.

          Of course, as I’ve said many times, Amazon.com’s success is no guarantee that Tesla Inc. will succeed. But there is a successful path to follow; a path that nearly all analysts are unable to see, because they aren’t familiar with how the finances of a successful growth company operate.

          Here’s an exception to that rule about analysts. (Fair warning: The link goes to a stock investor’s forum. Read comments at your own risk!)

          https://www.fool.com/investing/general/2016/03/27/how-tesla-motors-could-be-profitable-if-it-wanted.aspx

          1. Nix says:

            The analysis in that article seems entirely rational.

            If Tesla were in the business of just doing 3-7 year updates to the Model S (like many car companies do with the majority of the cars in their lineup) they certainly would have completely different financials.

            That’s actually Tesla’s biggest hurdle right now. They don’t have a big corral full of legacy model lines that they can stand upon while they develop new models.

            It won’t be until after Tesla has the MS, MX, M3, MY, new Roadster, and pickup under their belt, that Tesla will be in the same position as most ICE companies. Where sales on existing model lines will dwarf the costs of developing a new model.

            All an unavoidable part of launching an entirely new car company, regardless of drivetrain.

  4. SparkEV says:

    “total had escalated to near a half million dollars and 130 permits”

    Shouldn’t that be half billion, not million? Permits alone cost multi-million, so half million is almost a rounding error.

    One has to wonder, why do permits cost so much in US? I mean, you can literally build a small battery factory with $5.5 million.

    1. Jay Cole says:

      Indeed, thanks SparkEV, fixed!

    2. Nick says:

      Isn’t the cost of the permits partially needed to cover the review?

      When you file for a permit, it needs to be reviewed, etc. This cost money which has to come from somewhere.

    3. Pushmi-Pullyu says:

      SparkEV asked:

      “One has to wonder, why do permits cost so much in US? I mean, you can literally build a small battery factory with $5.5 million.”

      That’s an excellent question. I had assumed that was to cover the administrative costs for the government agencies involved, but a larger building shouldn’t take more time just to fill out the same forms!

      Do those fees include the cost of the government-mandated environmental impact assessments?

      1. SparkEV says:

        Studies shouldn’t cost $5.5M. Environmental study on 50 acre property was quoted about $50K, and even that seemed too high.

        1. Pushmi-Pullyu says:

          Well said.

    4. needa says:

      A lot of times the permits are priced per thousand in added value to the property.

      1. Nix says:

        ^^This is correct. The permit basically acts as a property tax on the added value of the property improvement.

        People will always complain about taxes, but this sort of tax is straight up Adam Smith economics tax on Wealth, right out of his book “The Wealth of Nations”. It is the cornerstone of modern economic theory, but that won’t stop the “no taxes” folks from complaining.

        1. SparkEV says:

          This has nothing to do with Adam Smith and tax. They call it a “fee” for a reason; it’s something they can arbitrarily set without voter say. In theory, they can have zero taxes and call all the revenue “fee”. In CA, you get hit with some fees (ie, fire fee) even with no services rendered. It’s a dangerous loop hole, but few people seem to care.

          As for taxes, you must not pay enough. Taxes were never this high, especially not during Smith’s days. Smith won’t be ok with taking away more than 60% of income in taxes via income tax, property tax, sales tax, gas tax, soda tax, blah blah tax of various forms.

          1. Pushmi-Pullyu says:

            Sparky said:

            “Taxes were never this high…”

            Another missive from the far-right-wing bubble-world, where reality rarely intrudes.

            In the real world, marginal Federal income tax rates* in the USA were 91% — that’s not a typo, ninety-one percent — during the Eisenhower era. According to PolitiFact, “single people making the equivalent of $413,200 would be in a 72 percent tax bracket, while a couple making $464,850 would end up in a 75 percent bracket.”

            During WW II, it was a bit higher; up to 94%.

            But of course, those are “only” real facts. Sparky clearly prefers “alternative facts”. 😉

            *”Marginal” tax rate means the tax rate that’s applied to the last dollar earned. That rate isn’t applied to all of the person’s income, just a certain portion of it. The rest is taxed at lower rates.

            http://www.politifact.com/truth-o-meter/statements/2015/nov/15/bernie-s/income-tax-rates-were-90-percent-under-eisenhower-/

          2. Nix says:

            SparkEV, if you don’t understand the connection to Adam Smith, you will have to actually read his books. Don’t go to some website that attempts to co-opt Smith into their own beliefs (like Mises). Actually read and understand Smith’s books.

            A fee levied by the gov’t is a tax. As are tariffs. Making the current proposed 20% import tariffs the largest tax increase in modern history.

            But let me guess, you don’t consider that a tax increase on the American people….

  5. I would think, there can be a lot of lag time for the actual spending to happen from the time the permit is issued. To say that Tesla already spent that money doesn’t seem correct. A permit is issued before the actual work happens. There is also no guarantee that they really will spend the money. Tesla can get a permit for $1B construction by paying $5.5M, and make investors think that it “invested” $1B in GF, while it uses the money to cover its losses or pay out handsome stock grants to execs.

    1. Greg says:

      This is really shameful. Lolly-gagging with these futile points while bee’s are dying at an alarming rate is super sad and really bad! The future of our agricultural independence lies in peril and you don’t seem to care.

      1. Tom says:

        I have no idea what your comment means so I’ll just say I have a point of order…..honey bees are an invasive species to the US. They were brought here and are not native.

        1. Nick says:

          Are you really arguing against the preservation of honey bees?

          Crazy.

      2. Nix says:

        Greg Conway, is that you??? Really sad….

        *laugh*

    2. Pushmi-Pullyu says:

      It’s sometimes amusing to see how the anti-Tesla FUDsters keep moving the goal posts on their repeated lies.

      First it was “Tesla won’t really build a Gigafactory, it’s just a scam to pump up stock price.”

      Then it was “Tesla may have made a deal for land in Nevada, but they won’t actually build anything. It’s just a scam to pump up stock price.”

      Later it was “Well, Tesla may have cleared the land there, but note they haven’t actually built anything. It’s just a scam…”

      Still later, it was “Well, Tesla may have put up a building, but it’s just an empty shell with nothing inside. It’s just a scam…”

      The latest iteration of this argument, seen above in the FUD posted by the one who calls himself “Dr ValueSeeker” (obviously he failed at seeking value if he currently has a short investment in Tesla stock!) is a rather weak, pale shadow of the original argument. In fact, I’m surprised he’s wasting his time on such a weak-sister bit of FUD. Surely he can copy and paste a stronger argument from all of the anti-Tesla FUD posted over on Seeking Alpha?

      1. Mister G says:

        The scam Dr. Value seeker described is how he views business in general, he must love Trump lol. However, Tesla is not a scam they are making products to transition from fossil fuel economy to clean renewable energy economy and if a profit is made great if not that’s OK as long as the transition to clean energy continues.

    3. Mister G says:

      Dr value seeker do you view business as a means to create wealth at the expense of the environment and suckers? Or is business a means to create wealth in collaboration with the environment and in solving problems that will improve human life?

      1. Mister G, I only pointed out the flaw in equating the incurred costs of GF to value of the permits issued. Do you think, me getting a credit card with $1M limit means I already spent that kind of money? Same with permits.
        Sh** happens in business all the time. This comment wasn’t about that.