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Tesla Announces Details Of Proposed Gigafactory Battery Plant

It's another day and electric automaker Tesla Motors is in the news once again. Tesla announced Wednesday that they will be offering $1.6 billion in convertible senior notes to the public. According to the press release, Tesla will use these funds to assist in "the development and production of its 'Gen III' mass market vehicle, the development of the Tesla Gigafactory and other general corporate purposes." The "Gigafactory" is a proposed lithium-ion battery plant that will sit on an estimated 500-1000 acres of land, employ around 6,500 employees and have an estimated vehicle output of 500,000 units per year in 2020, according to the automaker. That amount of vehicles will require an estimated 50 gigawatt hours of energy per year in battery pack production. That's more energy in lithium-ion batteries than was produced globally in 2013. Construction of the Gigafactory is anticipated to take place during 2014 and all of 2015, followed by equipment installation in 2016. First production launch is scheduled for 2017. In keeping with the environmentally friendly theme, the Gigafactory will be "heavily powered" by both solar and wind energy, and according to our colleagues at Autoblog Green, "will also use older Tesla packs for storage." Tesla still hasn't announced in which state the factory will be built, but it has been narrowed down to four: Arizona, New Mexico, Nevada, and Texas. More details can be read in this PDF document released by Tesla and in the press release below. TESLA ANNOUNCES $1.6 BILLION CONVERTIBLE NOTES OFFERING WEDNESDAY, FEBRUARY 26, 2014 PALO ALTO, Calif., February 26, 2014 – Tesla announced today an offering of $1.6 billion aggregate principal amount of convertible senior notes in an underwritten registered public offering. Of the total offering, Tesla will offer $800 million aggregate principal amount of convertible senior notes due 2019 and $800 million aggregate principal amount of convertible senior notes due 2021. In addition, Tesla intends to grant the underwriters a 30-day option to purchase up to an additional $120 million in aggregate principal amount of convertible senior notes due 2019 and an additional $120 million in aggregate principal amount of convertible senior notes due 2021, for a total potential offering size of up to $1.84 billion. Tesla intends to use the net proceeds from the offering to accelerate the growth of its business in the U.S.

Elon Musk has a secret weapon to increase Model S demand

Tesla Motors has a bit of a reputation for not being as transparent as some would like. So, when the end of the fiscal quarter arrives, there's always a lot of interest in the financial statements the company is obligated to release. But the info and insights don't just flow from its official 8K filing. The automaker also holds a conference call that sees CEO Elon Musk, CTO JB Straubel and Chief Financial Officer Deepak Ahuja taking questions from assorted financial analysts for an hour or so. It's here that we often learn interesting details behind the numbers, as well as hints of what's to come, sandwiched between quotable quotes from Musk. This week's call, following the release of 2014 fourth quarter financial results, certainly didn't disappoint. When asked by a Barclay's representative how much money Tesla will put towards capital expenditures over the next several years, for example, the irrepressible Musk said the company was "going to spend staggering amounts." This, of course, makes sense when you consider the massive amount of work the outfit has already bit off and has begun chewing. There's the production preparation for the Model X, a multi-billion dollar battery "gigafactory" under construction, the growing of its store and service center infrastructure along with its Supercharger network, and Model 3 development. Still, the gleeful tone, when discussing the spending of billions of dollars, seems contrary to what one might expect during such a call. But, it's also part of what keeps these teleconferences from being a total snooze fest. That, and the unexpected mention of new products and candid discussion of challenges. Speaking of challenges, the situation in China was probably the biggest thing on most minds of company followers and was addressed early. Tesla's sales have been surprisingly lackluster there and Musk was quick to admit that, "we didn't execute on China super well last year" relaying how its sales team was actually telling potential customers it might be difficult for them to charge. He balanced out the bad news with the consolation that even if it had of delivered more in the territory, it wouldn't have affected this financial statement much, since the Model S is production-constrained, and any slack in one market is made up by demand in others. He did, though, make it clear that he expects things in the People's Republic to improve and to "be in good shape by the end of the year." What else did we learn from the call?

Morgan Stanley predicts radical auto industry consolidation

A lack of technological foresight and changing economic conditions may bring dramatic consolidation to the auto industry in the next 15 to 20 years. Industry analyst Adam Jonas at Morgan Stanley believes that the number of major automakers could go from around 30 today to as few as 6 in that time. However, a catastrophe is avoidable.
Jonas' argument is that the world has more automakers than it can sustain. He contends that too many of them are more focused on next year's models than attempting to adapt to technological change. Without looking forward, they won't survive.
Tesla might be the lighthouse leading automakers away from the rocks. While still quite small, it has disrupted the status quo and shown that there's more than one way to prepare for new innovations. "With proper execution, Detroit may thank Tesla Motors for being that stiff board in the back of the head right when they needed it," said Jonas to The Detroit News.