Premium luxury in an electric car and the first name that comes to mind is now Tesla. The California based automobile company has in the last few years thrust into the limelight of the auto industry by providing a superior product with a more affordable and environment friendly fuel source. Tesla is now ready to take the next step and start expanding its production capability and profit margins. What does this mean for the automobile maker?
New Production Capability
Tesla is looking for land in the South Western States of the U.S. for a brand new factory to increase its production capability. The factory will supply the two key components of the electric car; the battery and actual car unit. The factory will employ 6500 people and would roughly cost between $5 and $6 billion dollars to build. Tesla is projecting a massive increase in sales, projecting upwards of 500,000 units sold per year. The outlined plant has proposed a 10 million square foot facility on nearly 1000 acres giving the company the ability to mass produce and bring the cost of the car down to a more affordable market.
Why Is this good?![tesla]()
Why is it a good thing for the company to drop cost of the car by mass producing it? Right now the options to the bulk of car customers for electric vehicles is very limited. The range of affordability is not low yet soars very quickly. And since a car purchase is still a purchase, many consumers are looking for more bang for their buck. The biggest issue plaguing Tesla right now is the fact that their base model car costs over 60,000 dollars, fully stripped. When moderately equipped, that cost jumps to a whopping 90,000 dollars.
The plant will also make more than cars. The plant will be making the batteries that fuel and power the cars. But like any successful business, the plant will not solely produce batteries for just use in the cars. The plant will also make batteries that are able to be sold and used for storage generators and other applications. Tesla sees the other uses of their version of the lithium ion batteries that power their cars as the future of affordable powering solutions. Tesla is projecting the first production of cars and batteries from this currently proposed plant to start producing by 2017.
How will this factory affect overall cost?
As previously stated, the ability to mass produce will allow Tesla to drop the cost of their cars. Where the average Model S, the only car they currently produce, costs upwards of 90,000 dollars. Yet the company has already released their views that the cost of the same car by 2020 would be as low an MSRP as $35,000 dollars. Paying for a premium equipped car has always had a premium price attached to it. Currently the Model S only in the most expensive trim level can travel 250 miles with a super charging adapter equipped per charge. The new factory would be able to allow for the car to be produced at a cheaper manufacturing cost, allowing for the cars battery technology to have more money invested while making it affordable. The product of all of this labor and investment by Tesla is projected to allow even the most basic of models produced to reach 200 miles per charge.
Where is Tesla Currently?
Currently the company is based in California, with its battery and car productions being based in Nevada currently sits on 370 acre 5 million square foot facility. The current plant is currently under utilized, but Tesla has expressed that this new plant will allow for the company to utilize both plants more efficiently and drop overall costs of their produced units. The current amount of cars produced by Tesla do not exceed 10,000 units per year. However, that low of a production cost has not inhibited the company at all. In fact, their stock prices per share have continued to rise in the same amount of time that it has taken for the name to become synonymous with luxury.
The next step for Tesla is both a logical one and a smart business move. The need for expansion in an ever growing market, the electric car market, is on the forefront of cost effective and fuel saving technology. The price of expansion to Tesla is well worth cost because it will open up the company to a market of consumers that have been relatively unable to afford to break into the hybrid or electric car bracket. Simply by mass producing, Tesla would be financially able to lower the MSRP of each unit produced so that their signature Model S as well as future models will be more affordable to more consumers. By stepping up their production capability, Tesla will move beyond their specialized product, and move into the common ground for all types of buyers.
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