Tesla Bets “Gigafactory” Will Enable Affordable Electric Cars

Tesla Motors released its 2013 shareholder letter this afternoon, declaring record vehicle sales in the fourth quarter and annual revenue of over $2 billion. Looking forward, Tesla says its growing network of superchargers and service centers will help spur more sales this year in the United States. It also expects big sales in Europe and China. It thinks sales will hit 35,000, about 55 percent higher than this year (with sales of 22,477 cars).

Even at 35,000 cars, Tesla sales are a drop in the bucket of world auto sales. We’re following the company because of its goal of bringing down costs and making electric vehicles mainstream. In the letter, CEO Elon Musk says the company will soon release details about its proposed “Gigafactory,” which he says is key to the company’s goal of producing an electric vehicle that will cost about $35,000 (the cheapest Model S sells for $72,000, and you can pay well over $100,000 for some packages).

Batteries are the most expensive part of an electric vehicle (see “Driving Innovation”). Ordinarily, batteries components are made in separate factories–one makes electrode powders out of raw materials, another assembles cells, and yet another packages the cells into complete battery packs. The new factory will consolidate those pieces.

“[The Gigafactory] will allow us to achieve a major reduction in the cost of our battery packs and accelerate the pace of battery innovation. Working in partnership with our suppliers, we plan to integrate precursor material, cell, module and pack production into one facility. With this facility, we feel highly confident of being able to create a compelling and affordable electric car in approximately three years.”