Tesla Gigafactory faces stiff competition as international battery ‘arms race’ ignites

Tesla is slowly beginning to face stiff competition from other countries as the world races toward lithium ion battery mass production.

Giles Keating, chairman at investment consultancy firm Werthstein Institute, told CNBC that Tesla will face mounting competition from companies in China and Germany as it continues to ramp up its Gigafactory and battery production.

“There’s a kind of arms race on batteries around the world. We know that Elon Musk with Tesla has got this Gigafactory,” he said. “The Chinese are racing to overtake him; they’ll have three times the capacity. And then in Germany, we’ve just heard announcement of a new plan for a $1 billion factory on batteries.”

Indeed, Terra E Holding GmbH announced that it would be building its own Gigafactory last week in a move that was seen as a challenge to Tesla’s stake in the industry. Terra won government support for a 34 gigawatt-hour battery facility that would reach full production in roughly 10 years.

In addition to this recent news, Chinese companies are also poised to make a substantial impact on battery production in the future. Plans are in the works to set up factories in the country that would produce more than 120 gigawatt-hours a year by 2021.

This mounting competition may certainly be considered the “arms race” that Keating was referring to, as companies — and even countries — jostle for position over a rapidly expanding market.

Tesla CEO Elon Musk acknowledged Tesla’s ambitions to expand into these countries in last week’s earnings call, saying that new gigafactories could pop up in these countries to make production more efficient.

“We expect to keep the majority of our production in the U.S., but it’s, obviously, going to make sense to establish a Gigafactory in China and Europe to serve the markets there,” Musk said. “Because it’s not to build cars in California and truck them halfway around the world, particularly when you’re trying to make things as affordable as possible — that really hurts.”

In the meantime, Musk also boasted about his company’s position when he spoke about the efficiency of each battery.

“You know who people come to first when they’ve got a lithium ion battery? Us, because we’re their biggest customer,” Musk said.

Keating’s comments are the latest in a growing race to provide the world with the highest quality, most efficient lithium ion batteries.

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