Tesla Sketches Plan for Giant EV Battery Factory

Tesla Motors Inc. plans this spring to begin construction of a huge "gigafactory" capable of building enough lithium-ion batteries to power 500,000 electric cars per year by 2020.

The 10 million-square-foot plant has a projected cost between $4 billion and $5 billion and will begin making battery cells in 2017. Tesla says it will invest about $2 billion in the facility, with unidentified partners contributing the rest.

The company predicts the plant will slash the cost of the batteries in its EVs 30% in the first year of volume production. Tesla is scouting sites for the factory in Arizona, New Mexico, Nevada and Texas.

Several media reports say Panasonic Corp., which is already contracted to supply Tesla with EV battery cells through 2017, is likely to invest in the project.

Tesla wants to build its own battery plant because it worries that supplies from existing sources could run short as its EV sales increase. The factory's target output in 2020 would surpass total world production of EV battery cells last year, according to the company.

Media reports speculate the facility could supply other EV makers and personal electronics makers such as Apple Inc.

Tesla said earlier this year its assembly plant in California will make about 35,000 of its $71,000 Model S EVs this year. The company is expected to begin producing a similarly priced second vehicle, the Model X crossover, before the end of this year.

Tesla also is developing a much less expensive mass-market EV to debut in about 2017. The company predicts considerably higher demand for that car.