Tesla Motors Plans Tie-Up with Polypore - Analyst Blog

Tesla Motors, Inc. TSLA may join forces with Polypore International Inc. PPO for the manufacture of lithium-ion batteries for its electric cars. If successful, the partnership will see Polypore supplying membranes for Tesla's lithium batteries, which will be produced in the latter's ‘Gigafactory', according to media reports.

Tesla is likely to utilize the low-cost Polypore membranes as separators for the electric car batteries as it is the only lithium battery separator in the U.S. in the vicinity of Tesla's factory. It is estimated that Tesla could account for half of Polypore's revenues if the deal happens, though exact figures cannot be predicted.

In Feb 2014, Tesla announced its plans to build a large scale factory – Gigafactory – to supply lithium-ion batteries to the company's Fremont, CA, assembly plant. It expects the factory to provide economies of scale and reduce production costs based on innovative manufacturing techniques, reduced logistic wastes, optimization of co-located processes and lower overhead costs.

By 2020, Tesla expects the annual lithium ion battery production of the Gigafactory to exceed the global production in 2013. The factory will produce enough battery packs to allow Tesla to build around 500,000 electric cars by 2020. Also, by the end of the first year of manufacture of the planned mass market vehicle, the per kWh cost of production of battery packs is expected to be reduced by over 30%.

Tesla will be announcing at least two sites for the planned ‘Gigafactory' construction in the U.S. The automaker intends to break ground for construction work at the sites simultaneously, although only one will be used for construction of the Gigafactory initially. This unusual move is being made to avoid any last-minute problem in construction of the plant.

Tesla will be initiating the construction work this year and expects to finish the factory by 2017. Tesla is expanding its operations and plans to increase the production of Model S vehicles by 56% this year. The Gigafactory will produce low-cost battery packs to help the automaker launch less expensive vehicles in the market on time.
 
Tesla currently carries a Zacks Rank #4 (Sell).

Some better-ranked automobile stocks worth considering are Volkswagen AG (VLKAY) and Fox Factory Holding Corp. FOXF with both holding a Zacks Rank #1 (Strong Buy).

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