Tesla Gigafactory Groundbreaking A “Few weeks” Away – Panasonic Weighing Risk Scenarios

MAY 24 2014 BY JAY COLE 64

Tesla Ready To Break Ground On Gigafactory In "A Few Weeks", Panasonic Is Ready To...

Tesla Ready To Break Ground On Gigafactory In “A Few Weeks”, Panasonic Is Ready To…Keeping Thinking About It

On Friday, Panasonic let the world in on how things are going in relation to their involvement with Tesla on its upcoming $5 billion dollar battery factory.

Steady.  But cautious.

While JB Straubel, Tesla’s chief technical has said that Panasonic will be the only battery maker partnering with Tesla in the massive manufacturing facility,  Panasonic’s senior managing executive for the automotive unit Yoshio Ito, didn’t seem quite as “all in” as one would expect at this point when talking to reporters last week.

Tesla Shows Off The Model S Glider And 8,000 Odd Panasonic 18650 Cells That Power The Car Earlier This Year In Geneva

Tesla Shows Off The Model S Glider And 8,000 Odd Panasonic 18650 Cells That Power The Car Earlier This Year In Geneva

Mr. Ito said that Panasonic was taking things slow and had so far offered to work with Tesla on electronic controls as well as help with battery-cell cost reductions in order to get the price down on the packs.  At the same time, the exec casted a bit of a shadow on Tesla’s “cost reduction” plans for the factory:

“Is 30% in sight? Not yet. It isn’t that easy”

A Little Panasonic-Tesla Battery Signage From The Tokyo Motor Show

A Little Panasonic-Tesla Battery Signage From The Tokyo Motor Show

Mr Straubel updated the status of the Gigafactory saying that Tesla is just a “few weeks away” from breaking ground on the first (of two) factory sites.

So does that upcoming milestone event mean that Tesla is concerned about Panasonic’s apparent waffling?  Apparently not according to JP:

“There is not any frustration. It is that this whole external world is saying it is taking too long to get a commitment. With the excitement about the Gigafactory, suddenly the whole relationship is pushed into the limelight. It doesn’t feel to us that things are taking too long. There is no sense of foot-dragging.” as reported the WSJ on Friday.

So why is Panasonic seemingly so hesitant to get involved?  It is all about the risk according to the company.

After completely rebuilding the business from the aftermath of a poor investment decision last decade to build plasma TVs and mobile phones that cost the company more than $15 billion in losses, it has just started to once again post profits in the past year, and Panasonic is in no rush to repeat the $5 billion dollar investment mistake it made in building TVs.

For the Tesla project, Panasonic’s Chief Executive Kazuhiro Tsuga has formed a team to put together risk assessments and several backup plans to ensure the company doesn’t suffer another “plasma event” with Tesla.

The heart of these assessments are on Tesla’s business model and the number of cars (and therefore cell demand) there will be in the partnership.  The Wall Street Journal reports one Panasonic official told them (on condition of anonymity) that “Investments are scary considering the bitter experiences we’ve had.”

Panasonic already has a deal in place to supply Tesla with 2 billion cells through 2017, and maybe concerned about having too much manufacturing capacity if they are also building out the Gigafactory in partnership with Tesla – which would be a given if Tesla does not sell their 3rd generation car in the high volumes they expect to.

And while Mr. Straubel is putting a brave face on the slow decision making of Panasonic, Mr. Ito was a little more frank, noting Tesla likes to make quick decisions:

“I’m not sure if we’re keeping up with the speed sought by” Tesla, Mr. Ito said.

Wall Street Journal (sub), big hat tip to GeorgeS!

Categories: Battery Tech, Tesla

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64 Comments on "Tesla Gigafactory Groundbreaking A “Few weeks” Away – Panasonic Weighing Risk Scenarios"

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TitaniumMoles

Panasonic must grow some 3D rounded ornaments out of titanium.

Anon

A pair of metal spheres? Agreed.

Bennyd

There is absolutely nothing wrong with being prudent. This caution will ensure Tesla’s commitment to the 3rd generation.

Mint

Yeah, there’s a lot of risks:

-The unproven demand risk mentioned in the article

-If a supplier cranks out mass quantities of 30kW range extenders for $2k each, will people pay more for a 200-mile pure EV than a 100-mile EREV (which may need a different chemistry)?

-Will a superior/cheaper chemistry come out than the one Panasonic is using? PNNL’s work on Li-S is *very* promising

-Will the gigafactory wind up eating margins from Panasonic’s existing battery business? Is Tesla not offering enough in return for their IP?

Tough questions.

Bonaire

Mint- an EREV designed around 100-mile AER plus some small, lower-cost extender makes FAR (can I repeat) FARRR more sense for the buying public than a 200+ mile big giant battery car. If Model E or Gen-III or whatever you call it must be 60 kWh to succeed, that is possibly a poor move by Tesla staying pure BEV. Most consumers drive 20-50 miles per commuting day or maybe more. An EREV kind of car, like a Volt, makes far more sense for me and I drive much farther, on some days. I have one location I drive to that is 70 miles away. In the Volt, that is easy. 45+ miles in June or July on battery and the rest at about 40 miles per gallon. Then I plug in at 120V. Then return later in the day. I have done the 140 mile round trip once and used just over 1.15 gallon of gas. In winter, it is more like 1.5 gallons. 140 miles on 1.5 gallons. Now, is that so bad? Then on other days I am around town entirely on battery.

Khai L.
Bonaire, One of the things EV drivers don’t like about ICE’s is the maintenance schedule. Even with the volt, there’s a 15k mile scheduled maintenance of changing the crankcase oil. Given the option of a 200mile BEV (with free supercharger) and a 100 mile PHEV + range extender, I’d imagine many would rather have the BEV with fewer scheduled maintenance. Considering the size of the battery for a 100-mile PHEV, this beast could never exist. 50-mile PHEV’s and shorter are the more likely vehicles that will be competing with a 200-mile BEV. The i3 REx is truly crippled as it only has enough space for a 3-gallon tank (CARB compliance aside). As a contrarian example, my commute is 20 miles each way, but I also have to pick up kids from daycare and run errands. The leaf barely has enough range for this, but I have the joy of never having to fill up and never having to change any oil. Because I have kids, stopping every 2hrs for ~30mins is a must, so why not charge for free while I’m stopped? That’s the beauty of the gen3; it just fits into many family’s life and driving habits.
Mark H

Good points, but keep in mind that the 15,000 miles only applies to ICE miles. Most Volt owners will change oil due to age vs miles because their day-to-day driving is all electric.

I was a big fan of the 40kWh Model S and still like the 150 mile BEV and the 50-80 mile EREV. Nissan will be fine with their 150 mile battery as long as the chemistry is capable.

When battery density improves these issues will separate, but for now it’s either lug a big battery or an extender. Sometimes an emotional decision but often one of pragmatism.

Koz

The Volt’s cramped rear seats and smallish hatch are major complaints. The BEV has a big packaging advantage but your point is valid not from a cost perspective, rather a convenience. With Supercharging and gigafactory cost goals, I believe the Model III would have a similar first cost and lower TCO. Both have a place, although personally, I think a real world 100 mile BEV may have as big or bigger market than either.

Tesla fans always have something bad to say bad about every other car! Tesla cars are the ones needing drivetrain replacements every few thousand miles ( call it no maintenance), and here they are worried about a $20-30 oil change!

But coming back to Panasonic It is rally interesting that Panasonic also ‘sees throough’ th eTesla hype and ponzi. They see a vacuous model S backlog, and they ask themselves : do we really want to fork over $5B for these crooks/

Anon

All we see, is a See Through Troll… 😉

Bianco

The backlog is mainly due to Panasonic cannot deliver…

Spec9

“Tesla cars are the ones needing drivetrain replacements every few thousand miles”

Citation needed, Troll.

Check this on edmunds.com :
http://www.edmunds.com/tesla/model-s/2013/long-term-road-test/maintenance.html

Check the 3rd drive train article also by edmunds : “2013 Tesla Model S: Is the Third Drive Unit the Charm?”?
And they have just driven 20K miles.

http://www.edmunds.com/tesla/model-s/2013/long-term-road-test/2013-tesla-model-s-is-the-third-drive-unit-the-charm.html

Spec9

So one car has an issue and that means all the “Teslas” are bad? LOL.

OK Specy, one day I will hear you say “So the first 50 thousand cars sucked. But the next car onwards will be stellar. They will last as long as any cheap ICE cars.”

Show me the teslas driven more than 20K miles. That link is from a reputed car review company who are doing tests. And it didn’t happen once, but twice! And no telling how many more times it will happen.

Also, don’t forget to browse the numerous complains on teslamotorsclub.com.

Tesla avoids the dealer network as a plague for a reason – the truths will spill out quickly.

Aaron

GM had 13 deaths caused by defective ignition switches causing loss of control and no airbag deflation.

By your logic, ALL GM cars are DEATHTRAPS and will KILL YOU and EAT YOUR BABIES FOR BREAKFAST!!!!1!!one!!

A single data point does not make a trend.

MorinMoss

Tesla appears to be getting into the energy storage game.
If the Gen III doesn’t catch on, they can still build packs for stationary storage, given that CA now has a mandate and Elon has close ties with Solar City.

JakeY

I wouldn’t necessarily assume the range extender would mean a cheaper price. Once you add in the emissions equipment, the generator, transmission, etc that is necessary to integrate that range extender, it can easily turn out more expensive. And for a PHEV you tend to use power optimized cells that are more expensive and also limit the DOD more than a BEV (which raises the effective $/kWh). Packaging also becomes a problem.

GeorgeS

If I might add a couple other good quotes from the WSJ article:

“Tesla plans to use vertical integration in the giant factory, pulling in makers of component parts, like the metal suppliers for cathode and anode materials, into the plant.”

also:

“Lower costs for battery cells will come from lower logistics cost and cutting out middleman margin expenses, and even tying in base material supplies from mining companies.”

I believe Ni and Co are primary cost elements that need to be mined.

Koz

Exactly and those will probably account for about 20-25% of the savings. Production scale and chemistry tweaking could bring the rest. Panasonic should have as good a handle as anyone about the potential for cost reductions, however.

Quite right! Before we know, they will come up with other plans:
– Tesla will buy plantations and grow their own rubber. The rubber grown for centuries is no good for Tesla tires.
– Tesla is buying mines, to dig out their own rare earth materials.
– Tesla is hiring goelogists to search for new elements and sources of graphite.
– Elon has personally invented new forms of nano tech, which will make the cars light weight, When Tesla fans are infused with those stuff, they also will grow fire resistant, tougher and lighter, helping the model S range and green up the planet.

Before long, Tesla will take over the whole world with their innovation. Like it or not, here it comes.

Anon

Change scares you, does it not?

Aaron

I think what’s-her-face Tesla troll got a new user name.

liberty

My guess Panasonic doesn’t like the terms of the deal, but Tesla probably is talking to Samsung, LG, and JCI all of which might be better partners than panasonic. If panasonic worries too much about its bad bet on Plasmas, it may lose out on lithium batteries.

pjwood

My take is there is no way Panasonic is better off joining Tesla, than putting up the capital themselves and keeping the margin relationship they currently enjoy. Hence, the foot dragging.

Plasma had its lunch eaten by LED, and to me the CRT to flat screen revolution is one of the most contemporary comparisons to battery storage and cars. We don’t know the settled upon EREV / BEV format, or the batteries that will win out. ZEV mandates? Nerves? You bet.

Rob Stark

It is my understanding that Tesla will own the land and the buildings then lease a building(s) inside the complex to Panasonic. Tesla will do the same with component partners like Hitachi.

Then Panasonic buys the machinery and hires the workers for their battery cell center.

Panasonic monies don’t come into play right now.

GeorgeS

That’s what I read also. but I wonder if it is true. Sounds like a difficult proposition to work out.

Kind of like building a house with your own money on the promise from someone that he will rent it when you are done.

That might work if there are lots of renters out there but in this case there’s only one or 2.

Just a thought. Who knows what is really going on behind the scenes.

Rob Stark

More like building a Mall of America and negotiating with a retailer to get the best spot as the Anchor Store.

LG or Samsung can step in. Lesser performance but cheaper prices.

BYD. They would need to step up their engineering game.

Then there are the dark horses like Bosch or Johnson Controls. No direct experience with batteries at hand but pretty good engineering in similar fields.

liberty

Absolutely. Samsung and LG would be top on the list. Bosch may be for electronics and braking, but they worked with Samsung on batteries for the fiat 500e. JCI knows battery manufacturing and tesla/jci may already have patents on the chemistries, or they can license them.

Acevolt

I think Tesla should work with Samsung or LG instead. I think they would be much more supportive in helping Tesla build its factory and wouldn’t have this history of bad investments dragging on them.

sven

LG wouldn’t have this history of bad investments dragging on them? Really?

Are you forgetting about the battery factory LG Chem built in Holland Michigan that sat idle for years while it’s employees played board games, watched movies and performed community service on company time. LG grossly overestimated future demand for EV batteries. Luckily for LG Chem, they didn’t use their own money to build the Holland battery plant. LG Chem built the plant with $150 million in federal stimulus funds, and had to repay the government a paltry $2 million for misusing those funds.

What makes you think that LG Chem isn’t going to be as prudent as Panasonic in gauging the risk of battery demand not meeting Tesla’s projections, especially when LG Chem will be putting up it’s own money and the US government’s money to build the factory?

MorinMoss

Because LG didn’t lose $15 billion like Panasonic did and if Panasonic backs out, LG might try to get more favorable terms from Tesla.
In any case, wherever the plants are going to be built will get some kind of gov’t subsidy which Tesla can use to defray initial losses.

Given their track record, stock price and loan repayment to date, they should have less trouble getting help from the state than most of the competition.
Not to mention bringing new manufacturing capacity to the USA which only Nissan, out of the established automakers has done.

Big Solar

“a few weeks away” I’m surprised to hear that already…..

Bonaire

Few weeks away from battery swap too 🙂
How about in 2012, when the Model X was a few months away from its late 2013 promised delivery.

Wondering how this all plays out. Fun to watch, isn’t it?

+2.

Spec9

“Is 30% in sight? Not yet. It isn’t that easy”

This is the key part. They need to hit that cost reduction in order to be useful.

pjwood

@$250/kwh, current estimate, Barclays claimed this week that solar, plus storage, parity has been reached, in HI, and is all but 3 cents away, per kwh, in CA. So, w/o 30% knocked off, there are other economies creeping up. Despite all the engineering insights, and tech competition, different aspects of the demand are a critical piece.

MorinMoss

30% is a BIG drop in price.
Even reaching only 1/2 that will be hugely significant, especially in the stationary storage market.

arne-nl

To get that 30% cost reduction, you have to do things the Elon Musk way. But he hired Panasonic to run the show. Can Panasonic learn that trick?

Anon

He and his team will teach them…

John McKelvey
This is off topic, but I cannot understand why some large auto companies are pushing the fuel cell. Fuel cell vehicles give you that sweet, buttery, noise free ride that everyone associates with Battery Electric cars that’s simply because fuel cell cars are propelled by electric motors. It has nothing to do with the hydrogen fuel cell itself. The hydrogen fuel cell can’t dump energy quickly, so the so called fuel cell car must have a significant BEV style battery for snappy acceleration. What ? Wait a minute !!!! The drive train is electric and the good performance of our hypothetical fuel cell car is due to an EV style battery. This is then in essence an electric car. What ??? So, why do we need the fuel cell ? We don’t. at With the possible exception at present of battery range as a factor, the fuel cell makes no sense. The drive train is electric. And snappy performance is due to a BEV style battery. The only reason we need the fuel cell is to make hydrocarbon companies money by steam refining natural gas into hydrogen and hanging the expense of setting up thousands of hydrogen fueling stations onto… Read more »

You are right. Fuel cell care are electric cars tooo. They generate their own electricity, so no need to burn coal to charge your EV battery anymore.

The bad-a** Hyundai Tucson fuel cell cars just arrived in US shores in LA. Check them out below. By next year, the FCEVs might become the kings of EV world.

http://www.hybridcars.com/the-hyundai-tucson-fuel-cell-suv-has-landed/

Anon

*Robert Llewellyn voice over*

I’m simply gobsmacked. You and CherylG have soooo much in common, it’s like you’re made for for each other!!! Did you meet on HydrogenHarmony.com??? Or was it MoronMingle???

Rick Danger

Or maybe TrollTales.com?
+1

Spec9

Ah . . . so that’s it . . . he’s a fuel cell troll.

Imagine that! A 300 mile range EV under $50K! Even Elon Musk will go gaga over such an EV.

Also, we fully expect insideevs.com to cover fuel cell EVs too! They cover the following now:
PHEV : Plug-in hybrid Electric Vehicle
BEV : Battery-only EVs
BEV-Rex: BMW i3 Rex
FCEV : Fuel Cell EVs ( New in 2014!)

If not, insideevs.com should be renamed to ‘insidebevs.com”

JakeY

PHEV, BEV, BEV-Rex (which is basically a subcategory of PHEV) all have plugs

FCEVs, like non-plug-in hybrids (HEVs), do not, so they don’t fit into this website. Of course if someone comes up with a plug-in FCV, then that’s a different story, but a general FCV does not fit in here.

OK Jake, I don’t know who you are. But you found a hole in the thesis to be ‘plugged’. So, now you say, EV means ‘to be plugged-in EV’? Wonder, what happens if the solar panels on the car suffices.

EV = Electric Vehicle. Period. Meaning, electric drive train. What’s the confusion?
So, you are saying, unless that EV consumes huge amount of un-recyclable rare earth materials in the battery pack, and lugs it around, AND you burn coal and gas to charge it by ‘plugging in’, it isn’t an EV? I give up. Your logic of adulating the only cars you support is just too twisted.

Mikael

And we will se such an EV in a few years. And then a few decades later mabe even a FCEV at that price.

Mikael,
Check the link. The FCEVs just arrived in US to kick some b..ts. Don’t be caught asleep at the wheels of your Tesla. You can lease one in LA area, if you live there.

The FECVs are much more real than the fictitious model x or y, or whatever it will supposedly be called.

JakeY

I checked your link, it’s another lease-only test fleet like the Honda Clarity. There is no price tag to the car (it’s lease only, not for purchase).

So the actual general sale FCV has not arrived yet (we’ll see what Toyota does).

Aaron

Yes, FCEVs do exist. However, from a hydrogen-genration to fuel cell energy calculation, FCEVs are only nominally more energy efficient than gas cars. Better for the environment? Yes. Smooth powertrain like BEVs? Yes. Existing infrastructure? A tiny one. Fewer than 20 consumer fill-up stations. More efficient than BEVs? Not a chance.

Mark H

HEVs are electric too. The original mantra here was anything with a plug. Right now the auto companies are going after the credits with FCVs. If FCVs really wanted to be a player then they would increase their battery size and have the fuel cell function as an extender. With such a model you would actually need less infrastructure. At the same time, battery technology improves and the need for an extender lessens. And agreed that current methods of producing hydrogen is just a front for oil companies. The 1-in-3 EV drivers that currently produce their own electricity via solar see the light. I paid under $3,000 for the clean solar fuel source that will power my current EV, the next, and the next for 25 years. The superior mouse trap has arrived.

Jouni Valkonen

The most challenging thing with this investment decision is that if you are looking into past, you will learn nothing about the risks and possible gains involved with gigafactory. This is whole new situation with whole new technology and whole new risks.

John McKelvey
Once again, why pack around a regular EV battery in a fuel cell car just so you can have enough zip to get across the intersection, get out on the freeway, cross a mountain range or just plain pass somebody ?? Once again, the only justification for a fuel cell over a regular BEV is that a tank of hydrogen supposedly makes enough electricity to take you about 300 miles versus perhaps 100 miles in the average EV today. This should soon change, and already the Model S can go about 300 miles on a charge. The only advantage to a fuel cell car is that the oil companies will make a ton of money reforming hydrogen from natural gas, then selling it to us at $$ 1 million dollar a pop refueling stations built free of charge for the oil companies by the taxpayer. Even if we could get hydrogen from water inexpensively, there are still boat loads of problems with a “hydrogen economy”, Can you imagine if every one drove electric. Why, it would put the oil and gas companies out of business. I suspect that reformed natural gas is just as dirty as coal fired electricity from… Read more »
Chris O

If I were Panasonic one of my main concerns would be the relatively successful dealer war against Tesla. If Tesla cannot expand its retail infrastructure enough as a result or is even forced to give up its retail model altogether its chances for success on the all important home market are greatly reduced.

Also Panasonic might want to see some pretty darn convincing prototypes of the car that’s supposed to sell in its hundreds of thousands to make the giga-investment viable.

arne-nl

“relatively successful dealer war”

Relatively successful? It has been a PR disaster and free publicity for Tesla. The dealers have shot themselves in the foot, but don’t realise it yet.

Elon Musk can now taunt them by saying he can sell his car without restrictions in friggin’ communist China, but not in the United States, the free market champion of the world.

pjwood

+!

sven

Without restrictions?

To import and sell a USA made Model S in China, Tesla has to pay a 30% import duty.

To a build Model S in China, Tesla is forced to enter into a joint venture with a Chinese company.

Those sound like some pretty big restrictions to me.

arne-nl

Import duties are not restrictions. Canada charges import duties too. I am referring to restriction to the way Tesla can sell cars (direct to consumers).

I am not aware of any partners Tesla currently has in China.

sven

Import duties are not restrictions?

Being forced to raise the selling price of the Model S by 30% to pass along the import duty to the Chinese buyer is a big restriction on selling a imported Model S in China. Obviously, this import duty restriction favors cars built domestically in China.

Chinese law states foreign capital cannot account for more than a 50% stake in producing whole cars in China. In other words, Tesla cannot own 100% of a car factory in China. Tesla must enter into a joint venture with a Chinese company to build cars in China, and Tesla can own no more than 50% of this joint venture.

The reason Tesla doesn’t currently have a partner in China is because it is not currently building cars in China. However, Tesla is currently looking for a partner to build and operate a car factory in China.

http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20140212000067&cid=1102

Chris O

What I see is that Tesla has to convert shops into galleries in some states and agree not to expand its network any further in others while dealer lobbies tirelessly keep on trying to sneak new legislation through the legislature that outlaws Tesla’s retail model in an increasing number of states.

As for PR disaster, does it really matter if people hate the franchise dealership system?
Of course Tesla has the general public on its side but in a system of crony capitalism it’s really stuff like effective lobbying and campaign contributions that make all the difference.

+1.