[gizmo]

It looks like Elon wants to ramp up production in the new Gigafactory right away, and create home batteries from the excess capacity. A Gigafactory running at full capacity should bring the cost of lithium ion batteries way down. Electric cars haven't hit the mainstream yet, so he has to do something with the excess capacity, and this looks pretty straightforward.

So even if he sells these batteries at the break even point, he'll still get much closer to an economically viable Model 3, because the battery is such an expensive part in an electric car and this will bring the price of batteries down.

(I'm not sure if my reasoning makes sense though, because the Gigafactory isn't anywhere near finished yet, and according to wikipedia it won't hit full capacity until 2020.)

[bsilvereagle]

Home batteries have arguably fewer cycle times than a battery in a Tesla. By selling these, Tesla is essentially selling beta models to figure out kinks in the factory, in the batteries, etc, before putting them into their mainstream vehicles that have to suffer huge temperature gradients, lots of recharge cycles, etc.

[skore]

If I recall correctly, battery production is currently a bottleneck for Tesla production and one of the major reasons why there is a waiting period of a few months after ordering. So I'm not sure to what extent he depends on home batteries to find a use for excess capacity, even if Model 3 isn't available yet.

[higherpurpose]

What will be even more interesting is when he builds 10x the capacity of the Gigafactory, which he said he expects to happen in the future. At that point batteries should be completely commoditized and sold only slightly above raw material cost (which is great news for EVs).

[Aaronneyer]

Looks like they might finish the Gigafactory by 2016: http://www.hybridcars.com/gigafactory-could-open-ahead-of-sc...