How Tesla's strategy won the race for the global battery home application market

Tag: Undermine your own strategy

Tesla’s Gigafactory will soon be the largest covered building ever built and, with the permission of the Chinese company BYD, the largest battery factory in the world in what has become the fight to control of one of the most important technologies for the future.

Carmakers are changing one of the most important technologies for the future.

It’s official: Tesla Gigafactory is now the largest annual producer of battery power in the automotive world, with a run rate of approximately 20 gigawatt-hours. The staggering figure means the firm now produces more batteries in terms of kilowatt-hours than all other car makers combined. It’s a big milestone, and one that demonstrates the success of CEO Elon Musk’s project to build a giant factory in the Nevada desert.

If you are battery supplier you have to reinvent your strategy quickly.

The Gigafactory, first announced in September 2014, is critical to Tesla’s mission to bring electric cars to the world. The factory is only 30 percent complete, but already covers 4.9 million square feet of operational space and has set a staggering production rate. Tesla’s record is based on capacity rather than the actual number of batteries, which do rank notably larger than many other car makers. The Tesla Model S, for example, is available with a 100 kWh battery pack, while the Nissan Leaf comes with a 40 kWh battery.

When complete, the Gigafactory is expected to be the largest building in the world, entirely powered by renewable energy and reaching a battery production rate of 35 gigawatt-hours per year, where one gigawatt-hour is enough energy to supply one billion watts for one hour. Tesla claims it’s almost as much as the world’s total current battery production combined.

New sources of energy and the way of its storage are the biggest challenges of the 21st century

Tesla’s joint venture with Panasonic will make it one of the most relevant players in the field, a household name with greater capacity for expansion in an increasingly dynamic and contested market that goes far beyond the automotive industry, configuring one of the key industries in the transition to a world fueled by clean energy.

Electric vehicle autonomy increases and transportation-derived emissions fall, it’s increasingly clear that battery technology is subject to fewer limitations: Teslas have been on the road for more than a decade, clocking up hundreds of thousands of kilometers, while their batteries last much, much better than the critics of electric vehicle technology presaged.

But the key for Tesla is looking beyond the automotive industry. Battery manufacturing is set to become one of the most important industries on the planet, and whoever dominates it will occupy a privileged place in many ways, supplying a wide variety of industries from vehicles to household goods, as well of course as electricity generation. Twelve years ago, when he described his company’s “secret master plan", Elon Musk spoke not only about making cheaper electric cars, but included a third point, which was providing the means to generate zero-emissions electricity, a point that many pundits missed amid the hullaballoo over Tesla cars.

Today, with the company makes profit, it turns out that battery production has been the key to its strategy: the reason why auto industry veterans like Bob Lutz could not understand Tesla’s road map was because Tesla isn’t a car company, it’s a battery company.

Tesla, developing battery technology for cars, has created a technology that allows the market to be taken over by batteries for other applications.

Tesla isn’t a car manufacturer competing with other automobile manufacturers to transport people or goods; Tesla’s vehicles are consumers of the company’s main product: batteries, which are also used in huge storage power stations, homes and for all types of electrical installations. In the years to come, that market will be much more important than an automotive industry that, in its evolution from consumer product to a service, will require fewer units and rid the world of an excess of private vehicles currently gridlocking our roads and fouling the air we breathe.

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Comments

Name: Konrad Milewski
One of the best articles this month so far, keep up the good work.

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