The purpose of this thread is to form a working group to model economics and financial options for the Gigafactories. While there are other threads that discuss the Gigafactory more generally. I would like to focus this thread on getting the assumptions right and mathematically modeling the implications. So critical and constructive contributions from a variety of perspectives are most welcome. Some of the advantages of financial modeling include: Understanding the long-term capital needs of Tesla to support various growth rates, Understanding cost structures and sensitivity to assumption, Assessing financing options and deals with off-take buyers and suppliers, Determining the present value of a tax break or other incentives, and Valuing a gigafactory as a whole. To get the ball rolling, I want to share an off-take worksheet I've been playing with. It turns out that most of the essential financial issues are exposed when you try to answer the question, how might Tesla structure a five-year off-take aggreement to sell 1 GWh per year at a fixed price? My spreadsheet attempts to answer just that sort of question, and you are invited to play with it yourself. In short, I find that a contract allowing the off-take buyer to buy up to 1 GWh per year at the price of $125 per kWh require an upfront payment of about $95 million. Moreover, this pricing is compatible with doubling Gigafactory assets every 24 months without additional capital. All this, of course, depends on making quite a number of assumptions which I would like to discuss in detail and crowd source better starting points, but before getting to all that, let's consider what such off-take aggreements could mean for Tesla. The first thing to note is that the Gigafactory investment in plant and equiment is about $100 million per GWh annual capacity. So this off-take deal would essentially finance 95% of the capacity needed with its upfront payment. However, the agreement is essentially a five-year lease on that capacity. So for five years, Tesla can benefit from financing that does not require issuing more bonds or potentially diluting shareholder value, lock in years worth of demand at a competive price ($125/kWh), and recapture the productive capacity at the end of the agreement. So effectly, Tesla can finance, build out, and operate profitably a portion of capacity years before it is needed in other Tesla products. Additionally, one can think about Tesla Motors itself as the off-take buyer and consider how it might finance the $95 upfront at a low interest rate. For example, a five-year amortizing loan at 8% interest would add add about $23 per kWh to the $125 base price. Thus, simple financing can provide a path to a kWh price of only $147, that still allows Tesla to double it Gigafactory assets every 24 months. In future posts, I will review the various assumption I am making and invite us all to challenge and refine those assumptions, but for now take a look at the worksheet. It's all in there.