Tesla Motors says Texas is in running for big battery factory

Posted Wednesday, Feb. 26, 2014  comments  Print Reprints
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Tesla Motors, the electric-car maker run by entrepreneur Elon Musk, said Wednesday that it’s considering sites in Texas and three other states for a so-called gigafactory to make batteries.

Tesla said it plans to invest $4 billion to $5 billion in the factory by 2020 and will fund about $2 billion of that amount. In addition to Texas, the company is exploring locations in Nevada, Arizona and New Mexico, according to a presentation on its website. The facility may employ about 6,500 people, the Palo Alto, Calif.-based automaker said.

Tesla, whose stock has advanced more than sevenfold in the past year, said it’s offering $1.6 billion of convertible senior notes to help fund the project, which would make more affordable models.

Proceeds from the note sale will be used for the new facility and production of its planned “Gen III” vehicle, which would be cheaper than its current $71,000 Model S, the company said. The offering is also intended to help accelerate the growth of its business in the U.S. and internationally, as the automaker prepares to enter China next month.

“The Gigafactory is designed to reduce cell costs much faster than the status quo and, by 2020, produce more lithium-ion batteries annually than were produced worldwide in 2013,” Tesla said. “By the end of the first year of volume production of our mass market vehicle, we expect the Gigafactory will have driven down the per kWh cost of our battery pack by more than 30 percent.”

The battery plant would be built with partners, and “there’s a likelihood Panasonic would be part of it,” Musk told Bloomberg Television last week. Panasonic Corp. is both a Tesla investor and its main supplier of lithium-ion cells. Panasonic’s participation is “not 100 percent confirmed,” he said.

Tesla will offer $800 million of notes due in 2019 and $800 million due in 2021, the company said in a separate statement. The company plans to grant the underwriters a 30-day option to buy as much as an additional $120 million due in 2019, plus $120 million due in 2021, for a total potential offering size up to $1.84 billion. The coupon, conversion rate and other terms of the notes haven’t been determined, according to the statement.

Goldman Sachs Group, Morgan Stanley, JPMorgan Chase and Deutsche Bank AG are jointly managing Tesla’s offering, the company said.

“This is an industry that consumes cash,” said Alan Baum, an analyst in West Bloomfield, Mich., who tracks alternative-powertrain technologies. “This gives them the opportunity to execute their plan — and at the same time modify their plan.”

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