2/27/2014 | 1 MINUTE READ

Tesla Outlines Plan for World's Biggest EV Battery Plant

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Tesla Motors Inc., maker of the Model S electric sedan, says it will break ground in a few months on a $4 billion-$5 billion "gigafactory" that by 2020 will be able to make enough battery cells to power 500,000 electric cars per year.

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Tesla Motors Inc., maker of the Model S electric sedan, says it will break ground in a few months on a $4 billion-$5 billion "gigafactory" that by 2020 will be able to make enough battery cells to power 500,000 electric cars per year.

The California-based EV maker plans to invest $2 billion in the project and obtain the remaining funds from unidentified partners. Media reports say Panasonic Corp., which is already contracted to supply Tesla with EV battery cells through 2017, is a likely investor.

The 10 million-square-foot factory will begin cell production in 2017, according to Tesla. The company is scouting sites for the facility in Arizona, New Mexico, Nevada and Texas.

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

Media reports speculate the facility could supply other EV makers and companies such as Apple Inc. that make personal electronic devices.

Tesla expects to make only about 35,000 of its $71,000 Model S EVs this year. But it is preparing to introduce a similarly priced second vehicle, the Model X crossover, before the end of this year. It also is developing a much less expensive mass-market EV to debut in about 2017.

Analysts say Tesla could disrupt the traditional electric power industry if it can become the world's low-cost supplier of energy storage devices. Navigant Consulting Inc. has estimated that the global energy storage market will surge from about $500 million now to $12 billion in 2023. The firm notes that if batteries become cheap enough, they could be coupled with solar power to eliminate the need for conventional electric utilities.