Tesla Motors quietly has begun construction on its first Gigafactory after choosing Reno, Nev., for the location.
With Panasonic now in hand as partner, CEO Elon Musk told shareholders that Tesla is also planning a dramatic increase in car production. From 35,000 cars this year, it will ramp up to 100,000 in 2015, with a goal of about 300,000 a year when battery production reaches peak levels.
In late July, Panasonic agreed to share the cost of the $5-billion Gigafactory — which will have multiple locations — matched by Tesla's 40-percent commitment, plus 20 percent from other investors and local government incentives where the facilities will be built.
Panasonic will take up half the space to produce lithium-ion batteries for Tesla's cars.
"Panasonic is hands-down the world's best manufacturer of lithium-ion batteries," analyst Craig Irwin of WedBush Securities told the Los Angeles Times. "Tesla is young in its capabilities around these batteries. Having Panasonic in the partnership raises my confidence."
Tesla and Panasonic believe they can cut the cost of batteries by 30 percent in the first year through streamlined manufacturing processes driven by economies of scale, and by manufacturing battery cells optimized specifically for electric cars. Another important cost-cutter is that suppliers also will be on-site, eliminating packaging, transportation, duty and inventory carrying costs.
Next year, Tesla will begin production of its second car, Model X, an electric SUV. After that, it will focus on Model 3 — its first mass-production car with an estimated retail price of $35,000.
"The Gigafactory represents a fundamental change in the way large-scale battery production can be realized. Not only does the Gigafactory enable capacity needed for the Model 3 but it sets the path for a dramatic reduction in the cost of energy storage across a broad range of applications," said JB Straubel, Tesla co-founder and chief technical officer.
"I believe that once we are able to manufacture lithium-ion battery cells at the Gigafactory, we will be able to accelerate expansion of the electric vehicle market," said Yoshihiko Yamada, executive vice president of Panasonic.
The world's largest battery factory will produce cells, modules and packs for Tesla's electric vehicles as well as for the stationary storage market (including storing solar energy at home). Its goal is 35 gigawatt-hours (GWh) worth of cells and 50 GWh of packs a year by 2020, when it will employ about 6,500 people.
Read our background story, Tesla Gigafactory: Gamechanger for Electric Cars & Energy Storage.
Tesla stock is now at $251, its highest level yet. Some analysts have set a target price of $320 for this "most important car company in the world."
This story first appeared at SustainableBusiness.com.
Top image by Tesla Motors.