Aerial drone photo of the Tesla Gigafactory, Nevada (Source: ShutterStock)
For a term that didn’t exist before 2013, ‘Gigafactory’ has suddenly come to feature heavily in our day-to-day vernacular. They appear to be popping on every country’s infrastructure roadmap, and are central to a thriving EV ecosystem. With Reliance Industries (RIL) planning on building four of them in India, it’s important to see just how gigafactories can alter the topography of public and private transport.
What is a Gigafactory?
The term was coined by Tesla CEO Elon Musk, back in 2013, for the then-upcoming lithium-ion battery manufacturing facility in Nevada. Tesla claims that the factory gets its name from the word ‘Giga’ which represents a ‘billion’. However, in common parlance, a Gigafactory has come to represent a battery-production facility that’s simply gigantic in scale and brings multiple companies and components together to scale up lithium-ion battery production at an unprecedented level. Instead of kilowatt-hours (the unit used to measure a battery’s capacity) or megawatt-hours, manufacturers have to consider gigawatt-hours, to supply the level of energy they will need. Tesla, for example, reached an annualised rate of 20 GWh, back in 2018, which, according to the brand, made it “the highest-volume battery plant in the world”.
Tesla claims that the Nevada-based Gigafactory or Gigafactory 1 is only 30 percent done. This is despite the fact that the factory, in its current form occupies more than 1.9 million square feet of Nevada’s arid land. When completed, the Gigafactory will be the biggest building in the world by footprint, and the second biggest in terms of volume. While Tesla has several spots around the globe earmarked for their Gigafactory, the term has come to represent any megastructure dedicated to battery production, the likes of which are coming up rapidly across the globe. Elon Musk has also proven that building large-scale gigafactories needn’t take years. Tesla, under Musk’s steerage, wants its Gigafactory 4 to be the fastest-built factory in the world.
What purpose are they designed to serve?
Gigafactories aren’t just about making lithium-ion battery cells. While that may be their primary function, they are end-to-end renewable energy solution providers. Gigafactories are also designed to be the main hubs for renewable energy storage. At Gigafactory 1, Tesla has over 7000 employees. A part of it is leased by Panasonic, one of the largest battery cell makers in the world, which also makes battery cells for Tesla. The Nevada gigafactory also has separate departments to make electric motors (thus far for the Model 3), and one each for home storage and grid storage solutions. Tesla’s lead in the battery technology area comes due to the fact that it, although liaising with a brand like Panasonic, makes its own batteries. This puts its rivals at a disadvantage because of their reliance on external battery suppliers. The only solution is to make batteries in-house if a brand is to look at the long-term supply of durable, but more importantly affordable batteries.
One of the key issues ailing the Indian EV market is the fact that the absence of local battery production keeps manufacturers from being able to lower costs of the battery – the single most expensive component of an EV. The presence of local gigafactories also saves brands battery transportation and storage costs.
Where are gigafactories coming up?
Everywhere. Most countries are engaging in an arms race to become hubs for manufacturing the most efficient and sustainable lithium-ion batteries. If countries are to meet their target of banning all fossil-fuel powered vehicles by 2030, they need to establish an infrastructural foundation that will sustain their individual car industries for the foreseeable future. Simply put, no local automotive industry can thrive without a gigafactory. Not only will gigafactories serve as a hub for battery development, it will be the epicentre for all manner of technological breakthroughs in the EV space. In the US, Tesla has already announced plans to set up an additional two gigafactories in New York and Texas. In addition to this, General Motors is teaming up with LG Chem to set up a battery gigafactory in the state of Ohio.
With Reliance Industries (RIL) announcing plans to build four gigafactories to manufacture solar panels, electric batteries, green hydrogen and hydrogen fuel cells, India appears to be on the fast track to delivering its target of 450 gigawatts of energy. For this RIL has committed a sum of Rs60,000 crore. State governments too are keen on developing gigafactories, with Maharashtra recently having outlined plans to build at least one gigafactory in a bid to be the biggest producer of EVs and EV components in the country.
Also Read: Explainer | Reliance is betting big on green hydrogen. What is it and why is it important?
While support from the government and industry have given EVs the impetus they need, international brands have yet to announce any plans to set up gigafactories in the country. Most noticeable in its absence is Tesla, which, although entering the market very soon, intends to set up another large-scale gigafactory in China.
According to an article published in the Financial Times, six countries are in talks with the UK about building gigafactories. Car brands are tying up with electronic consumer goods brands such as LG and Samsung (both of which happen to be two of the biggest battery manufacturers in the world). At present, even brands like Jaguar, which are completely electrifying their fleet before most other luxury brands, are depending on foreign imports to provide them with the battery cells. Other brands like Nissan, are looking to revive their fortunes via a potential battery plant.
Almost all Western European countries have plans to build big gigafactories. With Tesla wanting to set one up in Germany, two major automotive conglomerates have also announced plans to build similar-sized gigafactories. The PSA Group and French battery maker SAFT (one of the seven largest battery makers in the world) intend to set one up in France while Volkswagen aims to open not one, but six gigafactories in the coming years, across Europe. With conventional assembly lines being made redundant, the resulting unemployment could be, to a degree, cured with the emergence of multiple gigafactories, the scale of which, we haven’t seen yet. Regardless of where else VW intends to build a gigafactory, Germany intends to be the biggest hub of gigafactories by the end of the decade, with 200-gigawatt hours (GWh) of capacity. With the Germany-based Gigafactory 4 nearing completion, the country is set to lead the EV race in Europe.
The third pit stop in Tesla’s gigafactory roadmap was China, where Giga Shanghai was built in less than a year. China is the single biggest market for electric cars in the world, allowing Tesla, among other things, to integrate itself into the local EV supply chain better. Having commenced operations in 2019, Giga Shanghai has proven to be one of Tesla’s most profitable ventures so far. But Tesla is far from the only brand that’s rapidly upscaling battery production. Chinese automaker BYD started operating a battery plant for EVs, back in 2018. Contemporary Amperex Technology, China’s largest EV battery maker, which has been exclusively supplying Tesla with batteries is planning a new battery plant in Shanghai, according to a report in Reuters.
At present, six of the largest cell manufacturing companies were founded in Asia. These include LG Chem, Panasonic, Samsung, SK Innovation among others. It would appear then, that Asia has a natural advantage and can scale up its battery production with ease. Tesla has proven that gigafactories can be built in under a year, and now intends to build another one in Asia, outside China. While it’s uncertain whether the next destination is Japan or South Korea, Asia could very well come out on top, as it takes on Europe and the US, in a battle for EV supremacy.Disclosure: MoneyControl is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.