Tesla Motors co-founder Elon Musk’s $5 billion 'gigafactory' may start bidding war among US states

Tesla Motors plan to build what co-founder Elon Musk bills as the world’s largest battery factory could not only shake up the power industry but trigger a bidding war between states in the US eager for the 6,500 jobs the $5 billion investment could create.


The electric-car maker announced that it’s selling at least $1.6 billion of convertible notes to finance the project and exploring locations in Texas, Nevada, Arizona and New Mexico for a 10 million sq ft facility.

Tesla has dubbed the project the “gigafactory,” and it would make Musk a force in both US manufacturing and electric power. The plant he envisions would have more capacity than any other to make lithium-ion batteries. “This has a huge impact beyond Tesla,” said Harley Shaiken, a labour economist at the University of California, Berkeley. “It gives enormous legitimacy to battery production and the future of the electric car because that lies in the battery. It’s high stakes, high technology.”

Target: 500,000 Vehicles

Musk said that the plant is key to Tesla becoming a mass-market automaker capable of producing 500,000 or more electric vehicles a year. The company’s cheapest model, the Model S, starts at $71,000.

The scale of production at the planned factory would be so immense that Tesla estimates it would drive down lithium-ion battery costs by at least 30%. Tesla, Musk said, would essentially become a power storage company.

That would benefit SolarCity, which is partly owned by Musk and may be a partner in the factory. A slide-show on the Tesla website includes a rendering of the facility in a desert landscape, with adjacent solar and wind farms to supply electricity. Construction could begin as early as this year, according to the presentation.

Proceeds from the note sale will also be used to produce a “Gen III” vehicle that’s cheaper than the Model S sedan.