Consumer Discretionary Is Tesla Motors, Inc. (NASDAQ:TSLA) Gigafactory Optimally Efficient?

Is Tesla Motors, Inc. (NASDAQ:TSLA) Gigafactory Optimally Efficient?

Published By News Desk at January 11, 2017 12:26 pm Below we analyze whether Tesla's recently-inaugurated Gigafactory produces lithium-ion battery packs in the most cost-efficient manner

Tesla Motors has been vocal about its cost-saving lithium-ion battery plant Gigafactory, which was recently inaugurated. It has long said that the Gigafactory would utilize economies of scale and acute measures to ensure batteries cost on average, 30% lower than the company's existing battery costs. Since then, analysts have been modeling how Tesla Motors Inc. (NASDAQ:TSLA) could achieve these cost synergies. One analyst, however, believes that Tesla has got it all wrong.

The analyst Paulo Santos, a distinguished contributor for Seeking Alpha, claims Tesla's Gigafactory and the entire battery productions schedule are already fraught with inefficiencies.

First and foremost, recently-released details of Tesla's battery manufacturing process at Gigafactory confirm that Tesla will manage the processing of battery cell modules, which adds to the cost, as well as the lead time for the production process.

Furthermore, the analyst claims that the design laid out by Tesla, as well as the entire period from the beginning of the process to the end suggests a system not different from what Panasonic itself operates with back in Japan. He concludes that the economies of scale that Tesla touted do not seem to have created much impact at least as of yet.

He further said that most of the value chain for producing lithium-ion battery cells rests in Asia and that producing cells in Nevada will not be advantageous.

He also pointed at emerging competition for Panasonic – Tesla's sole battery supplier and spearhead at the Gigafactory. He noted LG Chem is already supplying battery packs to almost every other EV manufacturer which implies lower costs. GM, in fact, has been touting a $145/kWh battery pack going into its latest mass-market EV, Chevy Bolt, which suggests Tesla could be missing on something big.