Tesla Gigafactory’s Promise: More and Cheaper Batteries

Tesla's $5 billion Gigafactory may be built in the Nevada desert, but it is the company's strategic hub to fill the world's highways, homes and offices with clean, green energy.

The company opened the doors to its partially built factory Friday, showing off what could become one of the world's largest buildings at 10 million square feet.

Tesla CEO Elon Musk said the Gigafactory will pump out batteries faster and cheaper than its competitors and reduce costs by at least 30 percent. That's important, analysts said, to meet the company's ambitious goals for transportation and energy production.

If shareholders approve Tesla's proposed $2.8 billion acquisition of SolarCity later this year, the Gigafactory will be a foundation for an integrated power and transportation company.

"I think as a combined automotive and power storage and power generation company, the potential is there for Tesla to be a $1 trillion company," Musk told investors in June.

Analysts said the factory presents a risk that's necessary for Tesla to reach its big goals. Analyst Ravi Manghani said the factory could substantially lower Tesla's costs for batteries. There's a great potential market, he said, but also a risk if the power storage or electric vehicle markets don't expand as quickly as Tesla anticipates.

"It's a big deal," said Manghani, director of energy storage for GTM Research. "It is going to be the largest storage-manufacturing facility in the world."

Musk updated Tesla's master plan last week, setting a course to integrate solar power systems and expand its line of vehicles to include small SUVs, pickup trucks, buses and semitrailers.

In 2014, Tesla and Panasonic began hunting for a site to build a battery factory in the United States. The companies considered locations in California as well as Arizona, New Mexico and Texas before choosing the 1,000-acre site outside of Reno, Nevada.

Nevada promised the Palo...

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