Tesla has announced its intention to build a total of five Gigafactories to launch the manufacture of solar panels and battery systems for both its electric vehicles and for home and commercial energy storage.
The company has published a letter to shareholders where Elon Musk, founder, stated that they are going to finalize the locations for at least two more Gigafactories, if not three.
Once the Gigafactories start, Tesla will become the largest manufacturer of lithium-ion batteries in the world.
The Gigafactory 1 located in Reno, Nevada, has already launched the production of battery cells for energy storage products, the Powerwall 2 and Powerpack 2. Tesla has already begun installing Model 3 manufacturing equipment at Gigafactory 1.
The Gigafactory 2 is expected to be opened in the second half of 2017 in Buffalo, New York. It will begin production of solar panels and shingles.
Tesla is planning the launch of Model 3 sedan with a base price of $35,000 later this year. The company will re-engineer and expand its manufacturing operations as it expects the boost of the car sales. The company unveils the intention to produce about 5,000 EVs per week in the fourth quarter of 2017. In 2018 the number could be increased to 10,000 per week.
“Initial crash test results have been positive, and all Model 3-related sourcing is on plan to support the start of production in July,” Tesla representative said. “Model 3 vehicle development, supply chain and manufacturing are on track to support volume deliveries in the second half of 2017.”
Now, Tesla turned out to be in the position when it will probably have to head to Wall Street for more capital as company shares dropped 5.8 percent on Thursday, the biggest intraday percentage fall in eight months.
Musk commented the release of fourth-quarter results saying that the upcoming Model 3 sedan, the main hope of company’s future profitability, requires no additional outside funding.
“But we get very close to the edge,” Musk said. “So we’re considering a number of options but I think it probably makes sense to raise capital to reduce risk.”
Tesla has had negative cash flow since 2014 and has posted a quarterly profit only twice since going public.
“The automotive business is an extremely capital intensive business and we keep seeing companies who are thinking of getting into it underestimate that,” said Autotrader senior analyst Michelle Krebs.
However, the risk for Tesla is more concentrated than for car companies that are planning individual model launches.
“No single launch is a ‘bet the company’ launch for established automakers”, said Michigan-based auto manufacturing consultant Michael Tracy, citing larger capital reserves. “If you’re Tesla, every time you’re stepping up to the plate, financially it’s extremely risky.”
Besides, Tesla has 373,000 reservations made for the Model 3 so it “has to ramp up faster than any other automaker would want to do,” Tracy said.