Tesla to raise $1.6 billion to build battery factory

Wed Feb 26, 2014 7:46pm EST

Tesla Motors Inc CEO Elon Musk talks about Tesla's new battery swapping program in Hawthorne, California June 20, 2013. REUTERS/Lucy Nicholson

Tesla Motors Inc CEO Elon Musk talks about Tesla's new battery swapping program in Hawthorne, California June 20, 2013.

Credit: Reuters/Lucy Nicholson

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(Reuters) - Tesla Motors Inc (TSLA.O) said on Wednesday it plans to raise $1.6 billion from investors to finance a new battery factory that will help the upstart U.S. automaker reach its goal of producing a lower-priced, mass-market electric car by 2017.

Tesla said the new plant, nicknamed the "Gigafactory," would be built in one of four states: Nevada, Arizona, New Mexico or Texas. By 2020, Tesla said, the plant would be able to make more lithium-ion batteries in a year than were produced worldwide in 2013.

The company said the plant will open in 2017 and ship batteries to the company's assembly plant near San Francisco.

The Palo Alto, California-based maker of high-priced electric cars plans to raise the money by selling convertible senior notes, half of them due in 2019 and the other half in 2021, it said in an 8-K filing with the U.S. Securities and Exchange Commission,

Analysts believe the factory may ultimately cost $5 billion to $6 billion to build and will be funded with the help of some of Tesla's Japanese suppliers, including Panasonic Corp (6752.T).

The plant, which will handle everything from processing raw materials to final assembly, will produce small, lightweight batteries for Tesla and may also supply other automakers.

Battery costs have been a major stumbling block to widespread electric car adoption in the United States, according to analysts. Tesla's new factory will lower costs by shifting material, cell, module and pack production to one spot.

In Tesla's earnings conference call last week, Chief Executive Elon Musk said the electric car maker expects to build the factory with more than one partner, but a "default assumption" was that Panasonic, as a current battery cell partner, "would continue to partner with us in the gigafactory."

"The factory is really there to support the volume of the third generation car," Musk, a billionaire entrepreneur, said on the call.

"We want to have the vehicle engineering and tooling come to fruition the same time as the "Gigafactory." It is already part of one strategy, one combined effort."

Tesla, which Musk founded in 2003, posted better-than-expected fourth-quarter results last week and said deliveries of its luxury Model S electric sedan would surge more than 55 percent this year to more than 35,000 vehicles.

By comparison, the best-selling car in the United States last year, the Toyota Camry, sold about 408,000 in 2013.

In after-hours trading, Tesla shares were up about 2 percent at $258.60, adding to a 2 percent gain in regular trading.

Earlier this week, Consumer Reports named the Model S car its overall top car pick for 2014. The magazine cited the Model S's "exceptional performance and its many impressive technological innovations," though the magazine called it "pricey" at $89,650.

(Reporting by James B. Kelleher and Bernie Woodall in Detroit; Editing by Cynthia Osterman and David Gregorio)

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Comments (2)
AlkalineState wrote:
Boeing has some batteries they’ll make you a heck of a deal on.

Feb 27, 2014 4:33pm EST  --  Report as abuse
Vuenbelvue wrote:
A average new 2014 Model S Electric with more bells and whistles than the basic model and with a warranty could cost $85,000 to $100,000 plus taxes and the fees. I think they are counting on the 55% increase in sales numbers to be counting on lease cars or company bought cars for upper management employees. Then too, sales include world orders and not just USA. Insurance costs go back to the liability of the battery argument in case of a wreck and availability and costs of parts. Seems the small total annual sales would not have the repeat business unless the buyer’s turn over their cars in trades for a new one each year. So you have a expensive car that saves a little in fill-up costs based on a 80-90 mpg rating to the well heeled who don’t care anyway about gas prices. I guess that justifies $258 a share and a $5 billion battery plant. How everything has changed since the Great Recession crash.

Feb 27, 2014 9:50pm EST  --  Report as abuse
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