Speaking at the World Energy Innovation Forum, Musk said Tesla Motors alone needs its planned $5 billion lithium battery factory to continue the company's rapid growth. Without the proposed "gigafactory" the electric-car maker would lack the batteries it needs to ramp up car production and introduce new models, he said.
"We're building the gigafactory because we can't think of any other way to scale," Musk told the energy forum at the company's factory in Fremont. "We either hit the sides of the Petri dish, or we build a bigger Petri dish."
The forum, which focused on market-transforming ideas in energy, took place in a corner of the sprawling auto plant where Tesla makes its second car model, the Model S.
The proposed gigafactory would double worldwide production of lithium-ion batteries, which could help lower battery production costs 30 percent just in its first year of full-scale operation. Tesla hopes to use those savings to create its $35,000 Gen 3 car, the company's first car aimed at the middle class.
The plant will not only supply Tesla but also Solar leasing company SolarCity. The company, which Musk chairs, started a pilot program that offers California homeowners Tesla battery packs to store electricity generated by rooftop solar panels.
But potential customers "won't be restricted to SolarCity," Musk said. "It'll be stationary battery packs for anyone who wants to buy them."
He also said the world would need many similarly sized factories to meet future demand for energy storage. Advanced batteries could help power buildings by storing power from wind farms and solar-power plants.
"There are going to need to be a lot of gigafactories, if not from Tesla, then from someone else," Musk said. "There's essentially quasi-infinite demand for energy storage, if the energy density and the price are good enough."
Tesla has named Arizona, Nevada, New Mexico and Texas as the most likely locations for the battery factory, although California officials are staging a last-minute lobbying push. Musk did not say whether Tesla has selected a winner.
Musk said the company, founded in 2003, erred in not designing the Tesla Roadster, its first car, from scratch. Built in limited numbers, the Roadster was based on the chassis of a gasoline-powered Lotus Elise sports car.
"That was a big mistake," Musk said. "We should have done it from the ground up, because we ended up changing everything. ... We ended up having to redesign the whole car and the whole power train."
Musk said he continues to oppose selling Tesla's cars through franchise dealerships as other automakers do. Tesla sells directly to customers, provoking opposition from dealers, who consider the company's business model a threat. Dealership associations have tried to shut out Tesla in states including New Jersey, Ohio and Texas as the company expands its network of stores.
"Really, the main reason for not going through traditional car dealers is nobody has a good experience with them," Musk said. "You always feel like they're going to rip you off. ... So why would we want to do that to our customers?"
David R. Baker is a San Francisco Chronicle staff writer. E-mail: dbaker@sfchronicle.com Twitter: @DavidBakerSF
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