“Processed ore from mines will enter by railcar on one side and finished battery packs will exit on the other.”
That’s Elon Musk writing to the shareholders of Tesla Motors (TSLA) on Thursday in a letter (PDF) detailing the company’s second-quarter results and its construction of a battery plant. As expected, the plant will be built in conjunction with Panasonic (6752:JP); part of the facility’s foundation has already gone up in Nevada. Tesla will oversee construction of the factory and run it, while Panasonic will invest in the machinery and supply its lithium-ion battery cells.
Musk sees this factory—and eventually, several more like it—as being key to the delivery of an electric car for the masses. Tesla and Panasonic plan to make more efficient batteries, using changes to the underlying chemistry of the products, and to bring down costs and increase supply by creating giant plants.
Musk is the only car executive who would be talking about ore in this era. Large carmakers abandoned Henry Ford’s raw materials in, cars out model decades ago in favor of becoming integrators of parts made by other companies. Tesla has gone in the other direction, whenever practical, with Musk happily negotiating deals directly with ore suppliers. “I just don’t think outsourcing reduces costs,” Musk said during the conference call with analysts. “It is almost always the case that when we in-sourced something it got cheaper.”
Tesla’s second-quarter results and forecast for the year ahead were good enough to kick the company’s shares slightly higher in after-hours trading. The company reported revenue of $769 million in the second quarter, up from $405 million in the same period last year. The company’s net loss expanded to $62 million, from $31 million, as Tesla spends on building its network of charging stations and service centers and on the development of its upcoming Model X SUV.
With investors far more interested in what’s ahead than what’s happening right now, Musk predicted that Tesla should be capable of delivering more than 100,000 cars per year by the end of 2015. He expects about half to be the existing Model S sedan and the other half to be the Model X, which will start shipping early next year.
The 100,000 figure is sure to keep bullish investors happy. It means that Tesla sees no let up in demand for the Model S and that the company must have strong pre-orders for the Model X. A number of Tesla watchers have expected demand for the Model S—two years on the market—to cool, given that only so many people can pay $100,000 for a car. The desire to buy the all-electric vehicles, though, still seems strong, and Tesla has picked up sales by expanding to Europe and China.
During the call with analysts, Musk noted an additional way he expects Tesla to differ from traditional car companies in the months ahead: It has brought in Formula One mechanics to teach Tesla service technicians how to fix cars at record speed. “Instead of one person per bay and working on a car over several days, a team comes on and attacks [the car],” Musk said. He hopes that Tesla can fetch a car from someone’s office and return it before the work day is done. “We want to fix the car and give it back to you without you even knowing it was gone,” he said.