Can Tesla produce Model 3s in volume, and make a profit? That’s the question of the day (or maybe, of the century). Investment management firm Worm Capital (among others) believes that the answer depends on how efficiently the company is able to manufacture its battery packs, and it recently sent a team to visit Tesla’s Nevada Gigafactory.
Worm analysts Eric Markowitz and Dan Crowley were treated to behind-the-scenes tours of each production wing of the massive battery factory. The steadily expanding structure is already the second-largest building in the US, and by 2020 it will presumably become the largest building in the world.
After touring the facility, Markowitz and Crowley feel “highly confident in Tesla’s production process. Previous bottlenecks appear to have been remedied, and we’re increasingly optimistic in Tesla’s ability to hit – and sustain – weekly production rates of 6,000 Model 3 battery units per week, and with new Grohmann machines, scale to [around] 8,000 per week with minimal additional capital investment.”
(George Galliers, an analyst at Evercore ISI who visited Tesla’s Fremont factory in August, reached a similar conclusion, saying that he “did not see anything to suggest that Model 3 cannot reach 6k units per week and 7k to 8k with very little incremental capital expenditure.”)
Contrary to the the frequent media depictions of Tesla as a disorganized and unhappy ship, Worm’s team found “a positive energy and high degree of organization” at the Gigafactory.
Markowitz and Crowley believe that Tesla’s 2170 NCA battery cells, produced in partnership with Panasonic, give Tesla an advantage over its would-be competitors. “We also continue to believe that small cells are superior for several reasons, making it perplexing that many legacy OEMs continue down prismatic or pouch paths. Tesla is also proactive – not reactive – in its refinement of battery process, looking ahead many years for potential shortfalls in commodities. We believe this cannot be said for its competitors.”
Messrs. M and C note that Tesla’s cells need to be both cost-efficient and energy-dense, and believe the process by which they are assembled and placed into battery modules and packs must ultimately be automated. The two analysts got a first-hand look at the automation Tesla is using to construct and integrate battery modules into Model 3 packs, and called it “a fascinating and futuristic system.”
“Cells from the Panasonic wing of the Gigafactory are carted over to assembly lines on self-driving vehicles. From there, cells are loaded into ‘Zones 0-4,’ where the cells are placed into modules and packs and tested for quality,” write the analysts.
Martin Viecha, head of Tesla investor relations, told the men from Worm that new equipment from Tesla subsidiary Grohmann Automation will help module production become three times faster and three times cheaper. Three machines will be sent to the Gigafactory around the end of Q3 or beginning of Q4. The new process was designed to alleviate a previous bottleneck in module production which delayed Model 3 production significantly.
Viecha also said that the Gigafactory is around 90% automated. Eventually, the company will strive to fully automate battery cell production, pack assembly, and drivetrain unit production.
According to Viecha, Tesla will likely achieve a battery cell cost of $100 per kWh by the end of this year, assuming commodity prices remain stable.
Source: Worm Capital