Tesla’s battery Gigafactory likely to result in over 50% oversupply

Lux Research has produced a decidedly bearish report on the much-lauded $4 billion battery cell factory being developed by Tesla Motors and Panasonic. Lux believes that the operartion will only deliver “modest” reductions in battery costs, will result in “questionable margins” for JV partner Panasonic and will likely produce more cells that will be required in Tesla’s e-cars.

“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.

Lux compares the Tesla/Panasonic cost reduction goals unfavorably to those of the U.S. Advanced Battery Consortium – which is targeting costs of $125/kWh by 2020. This compares to the goal of $274/kWh of Tesla. By contrast, Ford EV uses batteries costing $520/kWh currently.

Panasonic looks to come off second best as a result of the deal, writes Lux, as revenues of only $7 billion, on sales of 240,000 electric vehicles between 2017 and 2020, will deliver “razor thin margins” on its investment of $1.4 billion.

In a final bearish flourish, Lux has added that the Gigafactory is likely to result in 57% overcapacity. The analysts predict that Tesla Motors is likely to fall short of its plan to cell 500,000 electric cars, instead reaching sales of only 240,000 by 2020.

“This 57% overcapacity is unlikely to be filled either by rival carmakers or Tesla’s own plans to sell some stationary battery packs to developers like SolarCity for residential photovoltaic integration and other uses,” writes the report’s authors.

The Tesla-Panasonic Battery Gigafactor: Analysis of Li-ion Cost Trends, EV Price Reduction and Capacity Utilization was released today.