Tesla Motors Inc (TSLA)’s $5 Billion Gigafactory Poses Threat To Traditional Utility Business

Tesla Motor (TSLA)

The electric carmaker, Tesla Motors Inc (NASDAQ:TSLA), announced a $5 billion Gigafactory for the production of batteries in September 2014 and it is certainly one of the biggest of its kind. However, the Gigafactory, helping in lowering electric car costs, is scaring the biggest names in the utility industry.

The electric car manufacturer has started working over its Gigafactory in Nevada and the CEO of Tesla is hoping that the factory will help in cutting down the overall costs of its electric cars. The reason to worry for the utility business is the fact that the factory will also manufacture stationary battery packs. With Musk being the co-founder of SolarCity Corp (NASDAQ:SCTY), solar panel manufacturer and service provider, these batteries are likely to be used in more solar panel installations.

An energy consultant, Amory Lovins, Rocky Mountain Institute, talked about the threat it poses for renewable energy storage solutions adding, “That is an unregulated product you can buy at Home Depot that leaves the old business model with no place to hide.”

Tesla Motor (TSLA)

Even the financial institutions are lining up to praise the efforts of Tesla Motors Inc (NASDAQ:TSLA) in lowering energy storage costs. Morgan Stanley supported its approach adding,

“We believe there is not sufficient appreciation of the magnitude of energy storage cost reduction that Tesla has already achieved, nor of the further cost reduction magnitude that Tesla might be able to achieve once the company has constructed its ‘Gigafactory’.”

The shares of Tesla Motors Inc (NASDAQ:TSLA) have increased 48.71% year-to-date, even after the steep decline starting in September. The electric carmaker is investing more resources into strengthening its charging station network while gaining support from other companies as well. Its latest Model S Premium sedan is already gaining customer interest and is considered as a competent entry into the luxury car market.

This article has been written by Prakash Pandey.

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