Tesla 2016 Annual Report Download - page 10

Manufacturing
WeconductvehiclemanufacturingandassemblyoperationsatourfacilitiesinFremont,California;Lathrop,California;andTilburg,Netherlands.Weare
alsobuildingacellandbatterymanufacturingfacility,theTeslaGigafactory,outsideofReno,Nevada.
The Tesla Factory in Fremont, CA and Manufacturing Facility in Lathrop, CA
WemanufacturetheModelSandModelXandcertaincomponentsthatarecriticaltoourintellectualpropertyandqualitystandardsattheTeslaFactory.
TheTeslaFactorycontainsseveralmanufacturingoperations,includingstamping,machining,casting,plastics,bodyassembly,paintoperations,seatassembly,
finalvehicleassemblyandend-of-linetesting.Inaddition,wemanufacturelithium-ionbatterypacks,electricmotors,gearboxesandcomponentsforourvehiclesat
theTeslaFactory.Severalmajorcomponentsystemsofourvehiclesarepurchasedfromsuppliers;howeverwehaveahighlevelofverticalintegrationinour
manufacturingprocessesattheTeslaFactory.WemachinevariousaluminumcomponentsatourfacilityinLathrop,Californiaandarenearingcompletionofasite
expansiontoincludeanaluminumcastingsoperation.
WehavecompletedsignificantinvestmentstoincreaseourproductioncapacityandtobeginproductionoftheModelXattheTeslaFactory.Thisincludes
thecompletionandlaunchofthefirstphaseofanewhighvolumepaintshop,oursecondbodyassemblyshop,twonewstampinglines,aseatassemblyfacility,
andanexpansionofthebatterypackanddriveunitproductionlines.
WeplantoproduceModelS,ModelXandModel3attheTeslaFactory.InsomeareasoftheTeslaFactory,wehavedesignedourinvestmentswith
flexibilitytoaccommodatemultipleproducts.Forexample,ournewhighvolumepaintshopandnewstampinglinescansupportallthreevehicles.Ourfinal
vehicleassemblylineisproducingtheModelSandtheModelXwhilecertainpowertraincomponentsaresharedbetweentheModelSandModelX.Overthe
courseof2016,weplantomakesignificantadditionalinvestmentsattheTeslaFactoryinordertobeabletostartproductionanddeliveriesofModel3,inlate
2017.TheseincludeanewbodyassemblyshopandModel3finalvehicleassembly.
The Netherlands
OurEuropeanheadquartersandmanufacturingfacilitiesarelocatedinAmsterdamandTilburg.Theentitiesthroughwhichthesefacilitiesareoperatedhold
therightstomanufactureanddistributeallTeslaproductstocustomersinallmarketsoutsideoftheUnitedStatesandprovidecorporateoversightfunctionsfor
Europeansales,service,andadministrativefunctions.OuroperationsinTilburgincludefinalassembly,testingandqualitycontrolforvehiclesdeliveredwithinthe
EuropeanUnion,apartsdistributionwarehouseforservicecentersthroughoutEurope,acenterforremanufacturingworkandacustomerservicecenter.
The Gigafactory outside of Reno, Nevada
WearedevelopingtheGigafactoryasafacilitywhereweworktogetherwithoursupplierstointegratebatterymaterial,cell,moduleandbatterypack
productioninonelocation.WeplantousethebatterypacksmanufacturedattheGigafactoryforourvehiclesandforourTeslaEnergyapplications.Webroke
groundontheGigafactoryinJune2014andbeganassemblingourTeslaEnergyproductsinthefirstportionofthefacilityinthefourthquarterof2015.
WecurrentlyexpecttoproducecellsattheGigafactorybeginningin2016foruseinitiallyinourTeslaEnergyproductsandlaterforourvehicles.The
Gigafactoryiscurrentlyexpectedtoattainfullproductioncapacityin2020,whichisanticipatedtobesufficientfortheproductionofapproximately500,000
vehiclesannuallyaswellasfortheproductionofourenergystorageproducts.Bythattime,weexpectbatterypackproductioncapacitytoreach50GWh.Ofthis,
weexpecttobuild35GWhofcellproductioncapacityattheGigafactoryandpurchase15GWhofcellsfromothermanufacturers.
WebelievethattheGigafactorywillallowustoachieveasignificantreductioninthecostofourbatterypacksonceweareinvolumeproductionwith
Model3.ThetotalcapitalexpendituresassociatedwiththeGigafactorythrough2020areexpectedtobe$4to$5billion,ofwhichapproximately$2billionis
expectedtocomefromTesla.PanasonichasagreedtopartnerwithusontheGigafactorywithinvestmentsinproductionequipmentthatitwillusetomanufacture
andsupplyuswithbatterycells.WehaveasupplyagreementwithPanasonicthat,amongotherthings,allowsustopurchaseaminimumof1.8billionlithium-ion
batterycellsatpreferentialpricesthatweintendtopurchasefrom2014through2017.Wehaveagreedtoprepareandprovidetheland,buildingsandutilities,
investinproductionequipmentforbatterymoduleandpackproductionandberesponsiblefortheoverallmanagementoftheGigafactory.
Supply Chain
Ourvehiclesuseover3,000purchasedpartswhichwesourcegloballyfromover350suppliers.Wehavedevelopedcloserelationshipswithseveralkey
suppliersparticularlyintheprocurementofcellsandcertainotherkeysystemparts.Whileweobtaincomponentsfrommultiplesourcesinsomecases,similarto
otherautomobilemanufacturers,manyofthecomponentsusedinourvehiclesarepurchasedbyusfromasinglesource.Inaddition,whileseveralsourcesofthe
batterycellwehaveselectedforourbatterypacksareavailable,wehavecurrentlyfullyqualifiedonlyonecellforthebatterypacksweuseinourproduction
vehicles.Weareworkingtofullyqualifyadditionalcellsfromothermanufacturers.
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