In order to guarantee that the ground-breaking of its lithium-ion battery producing gigafactory goes smoothly, Tesla Motors (NASDAQ:TSLA) is taking a unique approach to minimize legal and regulatory hiccups that could disrupt the timing of production. Up until the first shovels are placed, Tesla will be planning at least two different sites in different states to ensure that at least one of them will be ready for action when the company is, Bloomberg said.
“What we’re going to do is move forward with more than one state, at least two, all the way to breaking ground, just in case there’s last-minute issues,” CEO Elon Musk, Tesla’s chief executive officer, told the publication in an interview this week. “The [number one] thing is we want to minimize the risk timing for the gigafactory to get up and running.”
The plant is a key factor in Tesla’s plan to introduce an entry-level, sub-$40,000 electric car that will take the brand from a niche player to a mainstream competitive force to be reckoned with. Thanks to economies of scale, the factory will be responsible for lowering the cost of the battery packs used, helping Tesla lower the cost of the car dramatically. Therefore, any delays of the factory would throw off the production schedule for the Gen-III vehicle, or Model E, the vehicle which Tesla is pinning its future on.
In addition to making batteries that are 30 percent cheaper than the units now available, the plant would also supply packs to Musk’s SolarCity venture, thus letting homes and buildings with solar panels store the energy that they generate, Bloomberg said. The factory is estimated to cost roughly $5 billion, and ultimately employ 6,500 people.
Tesla previously announced that four states — Texas, New Mexico, Nevada, and Arizona — were in the running to host the factory. Musk didn’t disclose which two (or more) were under the strongest consideration. Tesla’s strategy to prepare two potential sites is certainly unusual, but Tesla has shown so far that defying convention is what it does best.
“There’s no doubt that this type of sourcing strategy is unconventional,” Michael Robinet, managing director of industry consultant IHS Automotive told Bloomberg. “But Tesla is good at breaking a lot of practices that are standard in the industry.”
However, Musk further makes the case for two locations by arguing that down the road, Tesla may actually have the need for two gigafactories. “We will end up spending more money than would otherwise be the case to minimize the timing risk,” he said. The design stages and the gearing up for production of the Model E must be done in tandem with the gigafactory, Musk added.
“There are a lot of moving parts, a crazy amount of moving parts,” Musk told Bloomberg. “If there’s a laggard there, we’ll have this massive facility and a ton of people trained and no ability to recoup revenue. It will be quite a bad situation.”
The balance of timing is so crucial that even Tesla’s home state of California didn’t make the cut for the factory, due to the amount of time needed to walk through California’s notably strict environmental policies and regulations for approval.
“California has a lot of regulatory agencies, and although this will be a very green factory, we can’t have a situation where an enormous amount of data has to be processed by a regulatory agency to find no significant impact and then give us approval to proceed,” Musk said.
As for the new car, details are few, but it’s expected to play on the same field as a BMW 3 Series — at least in price. Given the popular nature of the Bimmer, and the Tesla’s growing following, it’s a safe bet that Tesla will be selling them as fast as it can build them, provided its as well-executed as the Model S sedan is.