Comment by DenisM | Hacker News Reader

Comment by DenisM | Hacker News Reader

Musk has previously said in an interview that Li-Ion batteries were at $600 / kwh, but when he looked at the component and manufacturing costs they were at $100 / kwh. Somehow the entire supply chain has piked up a lot of overhead, and he realized it would be possible to reduce that. At those prices, Model-S battery pack costs are between $36k and $51k!

When I realized that, I came to conclusion that Tesla Motors could be viewed as merely a stepping stone on the way to building a Gigafactory.

When demand for batteries is low, a low-volume battery factory has to share its suppliers with other clients, and those suppliers will price their risks and profits into the deal, multiple times along the chain. On the other hand if you have enough volume to justify having the entire manufacturing cycle under one roof, from ore to ready packages, all those markups go out the window. It wouldn't surprise me to see overhead going from the staggering 500% to a more moderate 50%, but only as long as there is enough demand for all of those batteries. Which is why you need cars - they consume a lot of energy.

By now it's pretty much certain that Tesla will be the first to build a Gigafactory. The interesting bit is whether Musk figured out a way to make sure no one has the ability to build a competing Gigafactory and commoditize the business. Right now only Tesla itself can generate enough demand, so they are pretty safe. If Musk can convince the other car manufacturers to buy batteries from Tesla, it will kill the incentive for anyone else to build a competing Gigafactory for a long time. So at the least Musk needs to appear non-threatening to other car manufacturers, and perhaps the best move would be to split battery division away from Tesla Motors completely.

You use "Gigafactory" as if it was an established word. It isn't. It it the name of Tesla's battery factory being built in Nevada.

It's so named because its planned capacity is measured in gigawatt-hours of batteries per year. "A gigafactory" to refer to any factory of that size is a reasonable term to use.

Couldn't you just measure the capacity in directly in Watts instead of Watt hours / year?

Certainly, and you could measure battery capacity in joules, and... well, for some reason we've standardized on weird units for these things.

If we couldn't use words until they are established, no word would ever become established.

Think about this - how do words become words? There isn't a government agency that makes decisions on that, it's the people who do, through common use.

BYD is building a similar Gigafactory. http://cleantechnica.com/2015/03/23/byd-gigafactory-to-be-wo...

Exciting times!

One thing that Musk has and BYD doesn't is the eager attention of the world's best engineers. Musk has an interview where he described SpaceX having designed things in house instead of buying them, and coming up with much better solutions. I imagine that battery and rockets are similar to software in that regard - a top engineer is 10x more productive than an average engineer. Combination of scale and engineering talent might be Tesla's bet to stay ahead.

Musk is a great marketer. I would be reluctant to conclude BYD doesn't have the attention of great engineers though. There's a very large talent pool to pull from in China.

All told, more energy storage production is a good thing, regardless of the producer. There is a massive technological shift underfoot, the next 5 years are going to be fun to watch.

Global industry decisions are a lot to do with ego as well as necessity.

Once one person has a battery factory the same size as all the other battery factories in the world combined, pretty soon someone else will try and double it. I fully expect China to announce the construction of a new lithium battery plant larger than Elon's, shortly after it starts production.

edit, just noticed mstachowiak's comment about BYD's new factory being built. As a side note, lithium mining is going to get interesting - http://investorintel.com/technology-intel/china-may-making-l...

There are some alternative materials that will become viable if Li becomes too expensive. But yes, interesting indeed.

> Tesla Motors could be viewed as a stepping stone on the way to building a Gigafactory.

This is an even better summary than the post's title!

"The Tesla Gigafactory", "A battery factory".

Great points here. I think Tesla's move to open source their patents was for these reasons exactly.

With all those battery innovations(at the research stage) we keep hearing in the news, how can building a huge factory be considered a stable investment ? at some point in the future,won't something come that will need different manufacturing methods ?

In my opinion, something like the Gigafactory only makes sense in the context of (expected) innovations.

The usual way to lower costs is to specialize, and to have a diverse network of suppliers. The Gigafactory is meant to do everything under one roof, so it's the opposite of specialization (and low costs).

The advantage of something like a Gigafactory, however, is the ability to coordinate actions in-house. Transactions costs are lower, and Tesla is able to "upload" innovations rather fast (compared to a diverse specialized network of companies).

I'm sorry, but what is a Gigafactory?

http://en.wikipedia.org/wiki/Gigafactory

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