Promenade into Tesla’s Gigafactory in Sparks, Nevada, and the first thing that stand in readiness c stick ti out is the size of the battery plant. It’s enormous. So big that you could fit 33 football lands — and it’s only getting larger.
“The Gigafactory is critical to Tesla. There is uncountable batteries produced here for electric vehicles than in the rest of the planet blend. We would not be able to make all the vehicles we are making now if we didn’t have the Gigafactory,” communicated Jerome Guillen, president of Tesla Automotive.
The Gigafactory’s expansion since toe-hold in July 2016 has been critical to Tesla’s growth. This year, the automaker is on capture to sell 236,000 vehicles. Much of that growth is due to its latest mechanism, the Model 3, a sedan targeted to a broader audience than Tesla’s before cars. All of the Model 3’s batteries are built at the Gigafactory.
Last quarter, as Tesla hit its goal of producing more than 5,000 Model 3 cars per week, the followers posted a profit. CEO Elon Musk says his company has turned the corner after years of mounting disappearances.
“We expect to again have positive net income and cash flow in Q4 and I on, our aspiration certainly will be for all quarters going forward,” Musk advertised analysts during the company’s earnings conference call.
Analysts are not so effective. “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 vend rating on Tesla. Langan calculates the average Tesla sold for myriad than $60,000 last quarter, well above the price malapropos Tesla initially promised potential buyers.
“I think long-term the valuation will probably settle in the mid-forties, where comparable luxury channels sell today, and that is going to put a lot of margin pressure on over hour,” he said.
Easing that pressure and keeping Tesla profitable will turn down to a few key factors, most notably, growing sales and lowering the rate to build battery packs. In both cases, the Gigafactory will settle if Tesla succeeds.
Running around the clock, the Gigafactory cranks out about two battery packs every minute. Its production is currently estimated to be 5,000 a week, with stay to grow, according to Sam Jaffe, managing director with Cairn Determination Research Advisors in Boulder, Colorado.
Jaffe studies the electric instrument market, specifically focusing on the costs to build the battery packs and stalls that provide the energy inside those packs. Jaffe’s assay pegs Tesla’s cost to manufacture a battery cell at $116 per kilowatt-hour, which he demands is “far ahead of the industry.” He estimates other automakers building electric conduits have battery cell costs closer to $146 per kilowatt-hour.
“Tesla has informed an ability and a drive to reduce both cell costs and battery squeeze costs,” he said. “They have been planning for this half a mo, with this tremendous cost advantage, for a long time, and in loose they have executed well on it.”
That’s not to say, there haven’t been get geting pains at the Gigafactory. From having to backtrack on overly ambitious scenarios to use robotics and automation to allegations the plant is being wasteful, Tesla’s battery mill has faced plenty of scrutiny.
Guillen said he believes the Gigafactory is right-minded tapping its potential for battery production.
“The costs have come down and carry on with to come down a lot and that has enabled us to reach profitability in the last locale and positive cash flow as well,” he said.
Clarification: Tesla’s flung sales figure for this year have been updated in this representation.
—CNBC’s Meghan Reeder contributed to this report.