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Tesla
had to cut prices recently to increase demand, but that isn’t stopping it from expanding its manufacturing capacity at its Gigafactory in Nevada. Investors should be pleased, although they might have preferred the money be used on stock buybacks.
In a Tuesday blog post, the company announced $3.6 billion in investment for facilities in Nevada.
Tesla
(ticker: TSLA) will build a battery factory capable of producing 100 gigawatt hours of 4680 batteries a year as well as a manufacturing plant for the Tesla semi-truck.
4680 refers to battery dimensions. Those cells have a 46 millimeter diameter and are 80 millimeters long. Most Tesla batteries come in the 2170 form factor. Those cells have a diameter of 21 millimeters and are 70 millimeters long. The larger batteries are designed to have better energy density and power-to-weight ratio.
Essentially, the bigger cells make EVs more efficient and cheaper to produce.
The Tesla Semi was unveiled in November 2017. Initial vehicles were delivered to
PepsiCo
(PEP) in December 2022. Tesla wants to be delivering 50,000 units a year by 2024. That might generate up to $10 billion in annual sales for the company. Estimated sales in 2023 amount to roughly $100 billion.
The new investments in Nevada will create 3,000 jobs, according to the company.
Tesla’s history in Nevada stretches back to 2014 when it built a battery factory with partner
Panasonic
(6752.Japan). The battery factory was designed to produce 35 gigawatt hours of batteries each year. That is enough to make roughly 500,000 EVs.
It was an ambitious plan. Tesla was making about 35,000 cars a year in 2014.
Life to date, Tesla has invested $6.2 billion in the state and the battery plant is producing about 37 gigawatt hours of batteries a year. Tesla also buys batteries from third-party suppliers.
Some of the spending should be eligible for subsidies under the Inflation Reduction Act. Tesla didn’t immediately respond to a request for comment about any benefits from the new law.
Investors should be fine with Tesla investing for growth. Some investors may have preferred stock buybacks with shares down more than 50% over the past 12 months.
Investors will have a chance to ask management about capital allocation, subsidies, and growth when Tesla reports fourth-quarter earnings on Wednesday evening.
Tesla shares are down 2% in after-hours trading Tuesday a sign that investors might have preferred the money be spent elsewhere.
Tesla stock closed up 0.1% at $143.89. The
S&P 500
closed down 0.1%. The
Nasdaq Composite
fell 0.3%.
Write to Al Root at allen.root@dowjones.com
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