Tesla assembly Model S cars in the Tesla factory in Fremont, California. (AP Photo/Jeff Chiu)
There is nothing small about the ambitions of Tesla Motors and CEO Elon Musk. The brash California startup, planning the auto industry’s fastest production increase and mid-way through construction of the world’s largest battery plant, is seeking permission to double the size of its sole auto-assembly plant.
The city of Fremont, California, on Oct. 13 is to review Tesla’s request to add up to 4.6 million square feet of new structures to the existing 4.58 million already in use at its factory in the Bay Area city. The proposed new buildings would be added to property Tesla owns surrounding the plant and an additional 25 acres it wants to purchase. They would be used mainly for warehousing parts and materials to support plans for a vastly higher level of vehicle production, the carmaker said in materials filed with Fremont’s Planning Commission.
If fully built out under Tesla’s new “Master Plan” for the Fremont factory site, employment would eventually grow by a third to 9,315 workers from about 6,200 people currently, according to the proposal, which doesn’t lay out specific time frame. The San Francisco Chronicle reported the plan earlier on Friday.
“We are pleased to work with the city of Fremont on a plan that reaffirms our commitment to California and to eventually maximize the potential of our Fremont factory site,” the carmaker said in an e-mailed statement. “California continues to be the epicenter of Tesla’s manufacturing capabilities and we are proud to be the state’s largest manufacturing employer.”
California officials grumbled in 2014 when the state lost out to Nevada as the site of the Gigafactory, a $5 billion plant that Musk envisions as the world’s largest producer of the lithium-ion battery packs needed for Tesla’s electric vehicles and power storage devices. While operations at that facility are getting under way, Tesla has much work ahead to complete it.
Tesla’s plant is the sole large-scale auto production facility on North America’s West Coast. In its first incarnation, the factory opened in the early 1960s as a General Motors plant. It closed 20 years later owing to production quality issues and deteriorating relations between the automaker and union employees there. In 1984, the factory got a new lease on life as New United Motor Manufacturing Inc., or NUMMI, a joint-venture between Toyota Motor Corp. and GM. It operated for a quarter century until GM’s 2009 bankruptcy forced an end to production work there.
In a surprise move in 2010, Toyota President Akio Toyoda arranged to sell the shuttered factory and some of its production equipment to Tesla, which had been hunting for a site to begin production of Model S electric sedans. After initially building just a few thousand cars at the plant in 2012, Tesla this year may make about 90,000 Model S and Model X crossovers in Fremont.
The need to expand operations there comes as Tesla aims to quintuple annual vehicle production to about 500,000 units by 2018, and then double that to 1 million per year starting in 2020. A big driver for that growth is Model 3, a more mass-market sedan that Tesla intends to sell for about $35,000, or less than half the cost of a Model S or Model X. The company has so far taken deposits for more than 370,000 Model 3s, which go into production in 2017.
Tesla’s revenue is rising, but so too is its need for cash to pay for an ever-longer list of ambitious projects. The company has said it will raise additional funds to help pay for further capital investments, including Fremont production upgrades.
Musk is also pushing ahead with plans to merge solar power provider SolarCity with Tesla, a multi-billion acquisition plan that has not won universal praise from investor. Goldman Sachs on Oct. 6 downgraded Tesla shares to "neutral" from "buy" owing to concerns about the SolarCity deal and vehicle production plans.
"We now see incremental risk to the business related to management’s deployment of capital for M&A, and further believe that any delay in the company’s timeline to launch its new Model 3 will be detrimental to shares," Goldman analyst David Tamberinno wrote in a research note explaining the move.