Go Big or Go Home

Gigafactories rise up to meet wave of demand for batteries

Gigafactories are huge. It’s right there in the name. Tesla’s Giga Texas covers 10 million square feet, and its Giga Shanghai another 9.3 million. What might be even more impressive is how quickly they’re going up. Giga Texas and Giga Berlin went up in less than two years, and Giga Shanghai’s construction reportedly took just a year. Dozens more gigafactories are in the works. Benchmark Minerals estimates there will be more than 400 in operation around the world by 2030. All those battery-producing facilities are going to be needed to keep up with EV demand, which could hit 6 terawatt hours by the end of the decade.

Location, Location, Location

China has been at the forefront of the building frenzy, with more than 100 gigafactories in the country, accounting for more than 80% of the global share, by Benchmark’s count. The EV and lithium-ion battery industries there have a head start on the West and have plans for dozens more gigafactories. All that experience could explain why Giga Shanghai went up so fast. But the U.S. and Europe are determined to catch up, especially with legislation encouraging a transition from gas-powered cars to EVs and other renewable-powered vehicles.

Plans for more than 30 gigafactories throughout Europe have been announced, and the U.S. is rapidly developing a Battery Belt, with factory announcements in several states. The Department of Energy reports that U.S. battery manufacturing capacity rose from 55 gigawatt hours in 2021 to an estimated 177 GWh in 2023 and will nearly double again in 2024.

“With the Inflation Reduction Act in the U.S., there is a huge and urgent momentum for players throughout the world to move into American manufacturing of these gigafactories,” Evan Horetsky, a partner in the McKinsey Stockholm office, told the McKinsey Talks Operations podcast.

In Europe, Germany has been a particular region of focus, with Tesla awarding Giga Berlin and Sweden’s Northvolt planning a 60 GWh factory there to begin production in 2026. A big part of choosing gigafactory locations is proximity to existing auto industries. While EVs require fewer specialized parts than internal combustion engine cars, their batteries are heavy, so it’s much easier to build them close to where the cars are made rather than transporting them across long distances.

With so much domestic competition in China, battery giant CATL is putting gigafactories in Germany and Hungary. There are others factors too. With decarbonization being the whole point of the EV revolution, companies are conscious about locating their factories close to renewable energy sources so they can maintain green credentials.

“It matters how we produce a battery cell. If you use coal in your production, you embed a fair amount of CO2 into your battery, but if we use clean energy, we can build a very sustainable product. Our philosophy is that new energy-intensive industries, such as battery manufacturing, should be established in actual geographical proximity to where the clean energy is produced,” Northvolt CEO Peter Carlsson said in announcing Northvolt Drei, its latest Germany plant.

Gigascaling

In a decarbonizing world, with so many things shifting to electrification, demand for energy storage is sky-high. Pushed mostly by China, global EV sales could top 17 million this year, with steady growth projected through the 2020s. Even as demand slows in the U.S., there will still be a great need for more batteries.

“Wherever one sits on future EV demand, it could be argued that the current gigafactory bonanza has been well-judged,” Calum Macrae, head of automotive research and analysis at GlobalData, wrote.

With global battery production capacity CAGR around 50%, manufacturers are scaling on the fly. Northvolt Drei was originally planned for 32 GWh, and the environment changed so quickly that when the plant opens it will be nearly double that capacity. That ability to “gigascale” is why gigafactories are springing up in such numbers. At 60 GWh per year, the plant could turn out more than 2 million cells each day.

“We are building the plane as we fly here,” Stefano Piscitelli, Northvolt’s VP of group construction, told McKinsey Talks Operations. “The technology is continuously evolving in an effort to being always more competitive and more efficient — how many ‘giga’ you can fit in a building, for instance, or what is the perfect balance between the footprint and output in terms of giga power. It is very agile and fast.”

With so much changing so quickly, digital twins are helping construction companies keep track of the latest blueprints, and manufacturers are using them in daily operations to best utilize equipment and maintain inventory.

“Stakeholders will need to adopt Industry 5.0 technologies. These will help enhance manufacturing techniques, streamline battery value chain processes, and provide a springboard for personalized battery products in mass production. Tesla, Ford, and Stellantis have been frontrunners in adopting AI-enabled smart manufacturing to improve final product quality,” Frost & Sullivan analyst Aman Gupta wrote.

The Blueprint

Gigafactory premises don’t just need to contain facilities for the batteries to be assembled, they need plants for active material processing and, increasingly, on-site recycling. Automakers such as Nissan, Audi, and Mercedes have all revealed their plans for battery reuse. They often need clean rooms and dry rooms with highly specialized equipment and constant air filtration, so batteries don’t lose longevity. It’s a complex job, especially with gigafactory construction timelines running 12-18 months.

“The construction industry is normally very traditional, very risk-averse. So, this is definitely a huge challenge, because we don’t need to transform only this sector; we also have to transform the construction business,” Piscitelli said.

Contractors in the advanced manufacturing sector such as QD Construction, Yates Construction, and Austin Commercial are taking on the challenges in the U.S. The pace of change can be daunting.

“In terms of designing and constructing a production building, ideally, the first step would be to design the building inside out, around the production machines. However, considering the long design and construction timelines required in an industry with constant technological evolutions and high demand for equipment, you may not have the latest equipment available installed by the start of production if procured too early. So, flexibility and capacity are built into the design,” Guillermo Martinez, battery sector lead at construction consultancy Turner & Townsend, told Construction Briefing.

Steadily, a blueprint for the right way to build gigafactories is emerging. That’s a good thing, because we’re going to need a lot of them.