Tesla Motors Inc (TSLA)’s Gigafactory Too Ambitious says Lux Research Report

Tesla Motors Inc (NASDAQ:TSLA) plans to build a $5 billion gigafactory, which is currently being fought over by five different states who wish to house it, despite groundbreaking technically having begun already on a site in Reno, Nevada (the other four states looking to steal it away from Las Vegas Jr. are California, Texas, Arizona, and New Mexico).

However as Forbes reported today, that ambitious project, which aims to be producing 500,000 battery packs by 2020, may not be selling enough cars to stuff them into, which could spell trouble for everyone involved. Lux Research is predicting that Tesla Motors Inc (NASDAQ:TSLA) will be selling just 240,000 of their three electric vehicle models by 2020, leaving them with a vast excess of batteries. While it’s possible the batteries could be put to other uses, including selling them to other car manufacturers, the Lux report felt that was unlikely.

One of the prime skepticisms leveled against the gigafactory by the report is that it will be unable to significantly reduce the production costs of the battery packs and Model 3’s enough to make them more commercially viable on a broad scale.

Of course, Tesla Motors Inc (NASDAQ:TSLA) themselves believe they will be selling 500,000 EV’s annually by then, and that their gigafactory will be perfect for supplying those half a million cars with their electrically charged juice. Likewise, they believe the costs of battery production will shrink significantly in the coming years, and that by 2020, they may achieve cost parity with internal combustion engine vehicles. Other analysts agree with Tesla Motors Inc (NASDAQ:TSLA), and see them producing and selling 500,000 vehicles by 2020.

Ultimately it comes down to which analysis one believes about Tesla Motors Inc (NASDAQ:TSLA)’s ability to lower battery production costs and sell Model 3’s by 2020. It’s likely the overwhelming market sentiment will prevail and Tesla stock will continue to soar, making the Lux Research report essentially a moot point for now; but one that could cripple it in the future, should it eventually come true.

Disclosure: none