Tesla sites Gigafactory in Nevada among fears of overcapacity

Tesla Motors has selected Nevada as the state in which it will build its Tesla Gigafactory. The announcement was made Thursday by Tesla chairman and CEO Elon Musk and Nevada Governor Brian Sandoval.

“On behalf of the State of Nevada, I would like to acknowledge this monumental day and provide my initial support. This is a significant opportunity to make a major stride to improve our statewide economy. I look forward to receiving the necessary information so the Legislature can meet and take necessary action to support this major industry coming to Nevada,” stated Nevada Assembly Speaker Marilyn Kirkpatrick.

The Nevada Legislature will meet next week to act on a package of tax breaks and incentives needed to close the deal, according to a report in the Washington Post. According to the Post, Kirkpatrick says it's too early to say whether the necessary incentives, which could total $1.3 billion over 20 years, will have smooth sailing in a special legislative session.

Tesla says the Gigafactory will reach 50 GWhr in annual battery production by 2020—enough for 500,000 Tesla cars.

However, Lux Research predicts Tesla will miss its 500,000-car target by 2020, leading to overcapacity problems at the new plant.

“The Gigafactory will only reduce the Tesla Model 3’s cost by $2,800, not enough to sway the success of the planned lower-cost EV,” said Cosmin Laslau, Lux Research analyst and the lead author of the report titled “The Tesla-Panasonic Battery Gigafactory: Analysis of Li-ion Cost Trends, EV Price Reduction, and Capacity Utilization.”

But Tesla also plans to sell the batteries for stationary applications as well as for EVs.

Art Wheaton, an automotive industry expert at the Worker Institute at Cornell University, said Tesla's new factory “…may help in future battery development,” adding, “Electric batteries remain too heavy, too costly, and rely on Lithium, which is not as easily available as gasoline.”

He said he sees electric vehicle sales lagging in a growing automotive industry. As quoted in Newswise, he said, “The sales of electric vehicles have not lived up to the hype. Gas prices have stabilized and even decreased slightly in some markets. Toyota has ended its joint ventures with Tesla and has decided to emphasize fuel cells instead of electric vehicles for the future.

“There are many different options for consumers to choose from to power their cars. Electricity and pure battery cars have some advantages but also major hurdles to win over consumers.”

Wheaton concluded, “It is also very difficult to change the mindset of drivers after more than 115 years of gasoline dominance. Without major technological innovation, new legislation, or tax incentives, batteries still fall short.”

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