Tesla’s increasingly ambitious plans to rule not only the electric vehicle space but also the solar energy space are likely to become more difficult to achieve over the next year. It has been widely reported in recent weeks that Tesla’s gigafactory is facing some challenges in becoming fully operational.
What is perhaps less well understood is the magnitude of the supply chain challenges that will face Tesla and its gigafactory. Tesla’s goal is to produce 500,000 vehicles a year by 2018. The company has accelerated its production time table in large part due to the enormous amount of demand the company saw for its Model 3 sedan.
The firm announced almost 375,000 preorders for the vehicle. To fulfill this demand plus new demand that the company will likely see for its products over the next couple of years, Tesla needs to produce more lithium ion batteries in 2018 than the entire world produced in 2013. That’s not an impossible feat given the size of the gigafactory, but it is challenging.
In particular, while Tesla may have the facility to manufacture the batteries it needs, the company still requires enough metal to make all of those batteries. Nickel, cobalt, aluminum, and most of all lithium are all going to be needed in vast quantities for Tesla to meet its ambitious plans. And with the start of 2018 less 18 months away, that does not leave the firm much time to get all of its plans set in motion.
Tesla’s plans are also setting the company up as a competing customer against the likes of Apple and IBM which need lithium ion batteries for a host of other small electronic devices. To deal with the supply chain challenge, Tesla is taking page from Henry Ford’s playbook and attempting to vertically integrate its supply chain (hence the gigafactory).
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