TWENTY MILES EAST of Sparks, Nevada, a factory is rising from the red dirt of the high desert. It doesn’t look like much—a few completed structures amid exposed steel girders—but this building, dubbed the Gigafactory, is the key to Elon Musk’s sweeping plan to remake transportation.

Tesla estimates in full production, its Gigafactory will be capable of nearly doubling the world’s lithium-ion battery production levels.
Tesla estimates in full production, its Gigafactory will be capable of nearly doubling the world’s lithium-ion battery production levels. - Tesla says by 2018, it hopes the Gigafactory will be pumping out enough lithium-ion battery packs for half a million vehicles each year, two years ahead of Tesla’s original proposed date.Tesla CEO Elon Musk has previously estimated that producing lithium-ion batteries in-house at the Gigafactory will reduce production costs by around a third. Tesla’s current business agreement with Panasonic to produce lithium-ion batteries in Japan will be moved to the Nevada factory.Yoshihiko Yamada, Panasonic’s executive vice president, said he initially thought the Gigafactory proposal was “crazy”, before he commited to a $1.6 billion investment in the facility. He explained his position was due to the fact that the “production capacity of this factory would exceed the global capacity of the industry”.He concluded that Panasonic was interested in teaming up with Tesla because “we share the vision and mission of Tesla, contributing to the sustainable world”.Under the agreement, Panasonic and Tesla employees will work side-by-side at the Gigafactory, with Panasonic using its own equipment to produce and essentially sell the battery packs to Tesla, in-house. The agreement consolidates a plan that previously involved transporting the batteries between Japan and California.Another section of the facility is reserved for battery packs used for Tesla’s Powerwall business. Elon Musk says Powerwall production will make up around a third of the factory’s operations initially, increasing to 50 per cent in the next few years.Tesla says that by the second quarter of next year the facility should be at around 31 per cent complete, with an estimated output of 35 gigawatt hours of batteries by the end of 2018, accounting for the world’s entire production back in 2014. Peak output could be upped to 150 gigawatt hours, according to Tesla’s CEO.

Crews broke ground in June, 2014, and Musk says EV batteries will start coming off the assembly line next year. That seems optimistic, given that just 14 percent of the factory is finished, but 1,000 people are working seven days a week to hit that deadline.

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The assembly lines will do everything from make the individual cells—cylinders a bit bigger than an AA battery—to assembling the immense packs that power a Model S or store energy in someone’s garage. Tesla doesn’t disclose its costs, but says doing it all in-house will drive down the cost of a battery by 30 percent.

Controlling all aspects of manufacturing also lets Tesla embrace new battery chemistries and technologies sooner. It won’t have to wait for a supplier to develop the cells; it can simply start producing them. That will be essential as the company implements Musk’s Master Plan Part Deux (he really called it that), which outlines his plan to create a vertically integrated company that builds electric vehicles, batteries to store the power to propel them, and the solar panels to generate that power. He also wants to electrify everything from pickups to busses to 18-wheelers.