Today: Tesla announces plans for its battery factory, with the so-called Gigafactory expected to be up and running by 2020, costing $4 billion to $5 billion and producing more batteries than 2013's global output.
The Lead: Tesla's battery factory seeks to out-manufacture the world
Tesla Motors announced heavily anticipated plans for its battery factory Wednesday afternoon, revealing that the electric car company and its partners plan to invest billions in the facility in order to eventually produce more lithium-ion battery storage than was manufactured worldwide last year.
Tesla said that it will invest $2 billion into the facility, with partners joining in for a total expenditure of $4 billion to $5 billion through 2020, when the Palo Alto company expects the so-called Gigafactory to be able to produce at a rate as yet unseen in the world. Tesla did not officially announce its partners in the effort, though Panasonic -- which produces the batteries Tesla uses in its cars -- is expected to be involved.
"The Gigafactory is designed to reduce cell costs much faster than the status quo and, by 2020, produce more lithium ion batteries annually than were produced worldwide in 2013," a Tesla blog post read.
Tesla also announced that it would sell $1.6 billion in debt to help finance the factory, as well as development of its "Gen III" vehicle, a sedan similar to the Model S that Tesla expects to sell for a much lower price, about $35,000. The ability to produce cheap batteries is a critical part of the company's plan to offer a cheaper electric car, which is seen as crucial to the continuing development of electric vehicles.
"By the end of the first year of volume production of our mass market vehicle, we expect the Gigafactory will have driven down the per kWh cost of our battery pack by more than 30 percent," the blog post read.
Tesla said it has narrowed down the possible locations for the Gigafactory to four states: Arizona, New Mexico, Nevada and Texas. California was also believed to have been a candidate, but the company will not build the battery factory in the same state as its headquarters and Fremont automobile manufacturing facility.
The facility will be built on a lot between 500 and 1,000 acres in size, with up to about 10 million square feet of production space, and will employ roughly 6,500 workers, Tesla said. The company hopes to build new renewable energy sources to power the factory, with a focus on solar and wind power.
Tesla's plans to manufacture lithium-ion batteries has led to excitement for both the cost savings the move will produce for the car company as well as the ability to sell excess batteries, generating even more revenue. Tesla has already secured a deal to provide batteries to San Mateo solar installer SolarCity, for which Tesla CEO Elon Musk serves as chairman and investor.
Tesla stock -- already trading at record levels after skyrocketing 353 percent last year and more than 60 percent so far in 2014 -- shot up nearly 20 percent in intraday trading Tuesday after Morgan Stanley analyst Adam Jonas more than doubled his price target on the stock, from $153 to $320, due to enthusiasm for the Gigafactory and Tesla's plans for autonomous driving.
"Tesla's quest to disrupt a trillion-dollar car industry offers an adjacent opportunity to disrupt a trillion-dollar electric utility industry," Jonas wrote. "If it can be a leader in commercializing battery packs, investors may never look at Tesla the same way again."
Tesla set new intraday and closing record prices Wednesday, moving as high as $265 before closing with a 2 percent gain at $253. Shares shot up again after the close, when Tesla released its Gigafactory details, topping $260. SolarCity also rose to new all-time highs Wednesday, gaining 4.6 percent to $84.93 after moving as high as $88.35, continuing a rocket ride for the two companies that combined to add more than $1 billion to Musk's worth in one day.
SV150 market report: Apple falls as smartphone growth seen slowing worldwide
Wall Street produced slight gains overall Wednesday, and Silicon Valley technology stocks followed a similar path despite a decline from the area's top tech company, Apple.
Apple dropped 0.9 percent to $517.35 after IDC reported that the growth rate for smartphone shipments is expected to begin slipping in 2014, with pressure being applied especially to companies that focus on premium smartphones such as Apple's iPhone. "2014 will be an enormous transition year for the smartphone market," IDC's Ryan Reith said in Wednesday's announcement, later adding, "New markets for growth bring different rules to play by and 'premium' will not be a major factor in the regions driving overall market growth." While Apple will continue to generate strong revenues and profits with an average selling price of more than $600 on the iPhone, the company's market share will continue to decline while phones utilizing Google's Android operating system and Microsoft's Windows Phone offering will gain, IDC predicted. After Apple dipped from 18.7 percent of the market in 2012 to 15.2 percent in 2013, IDC predicts the Cupertino company will control 14.9 percent of the market in 2014 and 14.4 percent in 2018. Apple also appealed a court ruling Wednesday that determined the company illegally maneuvered to boost prices of electronic books.
eBay rose 2.1 percent to $57.34 as it entered another round of fisticuffs with activist investor Carl Icahn. After the San Jose software company and investor publicly battled Monday over Icahn's accusations of poor corporate governance, part of his attempts to force the company to spin off its PayPal unit, Icahn released another letter to shareholders Wednesday and eBay issued another rebuttal. After Icahn reiterated his unhappiness with CEO John Donahoe and two board members, eBay's resulting blog post took a harsher tone, stating, "We challenge Mr. Icahn to end his own charade with our shareholders. Let's focus on honest, accurate debate." eBay also announced an investment of more than $100 million in Indian e-commerce site Snapdeal.
Google held steady, adding 17 cents to $1,220.17 after a judge ordered the Mountain View company's YouTube unit to take down an anti-Muslim video after an actress sued, claiming she was duped into appearing in the video. Google executive Sundar Pichai caused a stir after saying that his company never put in a bid for WhatsApp before Facebook committed at least $16 billion to purchasing the Mountain View mobile messaging app. Facebook fell 0.8 percent to $69.26 while detailing its efforts to better target online advertisements, and rival Twitter gained 1.7 percent to $55.87 as short sellers continued to bet against the San Francisco company. Pandora Media established new record prices, moving as high as $39.58 before closing with a 2.7 percent gain at $38.87, and Netflix declined 0.9 percent to $448.79.
Up: SolarCity, Zynga, Pandora, Symantec, eBay, Tesla, Twitter, Workday, VMware, LinkedIn, NetApp, Yahoo, SanDisk, Yelp, Intel, Oracle, Electronic Arts, Intuit, Applied Materials, Cisco
Down: SunPower, Netflix, Apple, Facebook, Juniper, Splunk, Adobe, Gilead, Nvidia
The SV150 index of Silicon Valley's largest tech companies: Up 1.89, or 0.12 percent, to 1,564.79
The tech-heavy Nasdaq composite index: Up 4.48, or 0.1 percent, to 4,292.06
The blue chip Dow Jones industrial average: Up 18.75, or 0.12 percent, to 16,198.41
And the widely watched Standard & Poor's 500 index: Up 0.04 to 1,845.16
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.