Tesla will start phasing out the company’s battery manufacturing facility in California in 2017, a move that will save $1.2 billion in labor costs, according to the company.
The Palo Alto, Calif., company plans to sell its remaining battery manufacturing capacity to a consortium of Chinese and Taiwanese companies and a third of the facilities will be sold to independent developers.
Tesla said in a filing to the Securities and Exchange Commission that the reduction in its battery production footprint will take effect in 2019, after the companies have completed their transition to more sustainable manufacturing practices.
More:Tesla said the $1 billion savings comes from a “substantial and substantial reduction” in the amount of work required to build batteries.
“We have taken a strategic, cost-effective, and efficient approach to battery production, eliminating unnecessary production and assembly and eliminating costs associated with our operations, while maintaining an appropriate level of production capacity,” Tesla said in the filing.
Tesla said it has reduced the cost of batteries by 10% in the past year, and the reduction will continue in 2017.
Batteries used to be made of a special plastic called lithium ion, which can withstand temperatures as high as 4,000 degrees Fahrenheit.
But that material is now becoming more expensive to produce, and a variety of lithium ion battery materials have come on the market.
China is Tesla’s largest market, with more than one-third of the global electric vehicle market.
The company’s Model S sedan is one of the world’s most successful vehicles, selling more than 10 million units worldwide.