The Gigafactory Is Online and Boosts Tesla Stock
Wednesday marked a huge achievement in the Tesla Motors Inc (NASDAQ:TSLA) plan for turning the world onto green energy, as the company has officially begun production at its “Gigafactory,” coinciding with an over-four-percent uptick in Tesla stock on that day.
The Gigafactory, a giant lithium-ion battery plant tucked away in the Nevada desert, is still less than a third complete, but it has begun production on the battery cells that will eventually be used in both energy storage products and the “Model 3,” Tesla’s consumer-focused vehicle due to be released later this year. (Source: “Tesla Flips the Switch on the Gigafactory,” Bloomberg, January 4, 2017.)
The Gigafactory promises to do a lot for Tesla stock if all goes according to plan. Besides the added benefit of bringing thousands of jobs to Nevada, the plant will help Tesla hit its lofty production goals. In fact, the factory might be the most crucial part in Tesla CEO Elon Musk’s plan to deliver 500,000 vehicles in 2018. To hit those kinds of numbers, the company will need batteries mass-produced at an affordable rate, which is where the Gigafactory comes in to play.
The 4.9-million square-foot factory is hoped to make missed delivery estimates a thing of the past. On Tuesday, the company announced that it had fallen short of its fourth-quarter and yearly estimates of deliverable vehicles, and that was only 80,000 to 90,000 for 2016. If Tesla wants to hit its goal of 500,000 cars in 2018, it’ll need the Gigafactory to shoulder a lot of that heavy lifting.
Tesla stock may also benefit from the Donald Trump presidential administration, as the company largely operates within the U.S., bringing construction, development, research, and a number of other employment opportunities in industries that President-elect Trump has championed.
And, to make things even more enticing for Trump, Tesla’s production will be taking a bite out of a sector dominated by the global East, including China. In 2015, 88% of the global lithium-ion cell manufacturing was in China, Japan, and South Korea, according to a report by the Clean Energy Manufacturing Analysis Center.
The Gigafactory is set to play an outsized role in Tesla stock’s future. Scaling production and reducing the costs of the all-important battery cells will be absolutely critical to the TSLA stock’s future performance, and the beginning of production marks not only a landmark achievement, but also potentially the beginning of the future of Tesla Motors Inc.