Walk into Tesla’s Gigafactory in Sparks, Nevada, and the first thing that stands out is the size of the battery plant. It’s enormous. So big that you could fit 33 football fields — and it’s only getting larger.
“The Gigafactory is critical to Tesla. There is more batteries produced here for electric vehicles than in the rest of the planet combined. We would not be able to make all the vehicles we are making now if we didn’t have the Gigafactory,” said Jerome Guillen, president of Tesla Automotive.
Last quarter, as Tesla hit its target of producing more than 5,000 Model 3 cars per week, the company posted a profit. CEO Elon Musk says his company has turned the corner after years of mounting losses.
“We expect to again have positive net income and cash flow in Q4 and I believe, our aspiration certainly will be for all quarters going forward,” Musk told analysts during the company’s earnings conference call.
Analysts are not so sure. “Part of the real reason they beat in Q3 is because the mix was so strong,” said Colin Langan, an auto analyst for UBS who has a sell rating on Tesla. Langan calculates the average Tesla sold for more than $60,000 last quarter, well above the price point Tesla initially promised potential buyers.
“I think long-term the price will probably settle in the mid-forties, where comparable luxury vehicles sell today, and that is going to put a lot of margin pressure on over time,” he said.
Easing that pressure and keeping Tesla profitable will come down to a few key factors, most notably, growing sales and lowering the cost to build battery packs. In both cases, the Gigafactory will determine if Tesla succeeds.
Running around the clock, the Gigafactory cranks out approximately two battery packs every minute. Its production is currently estimated to be 5,000 a week, with room to grow, according to Sam Jaffe, managing director with Cairn Energy Research Advisors in Boulder, Colorado.