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Tesla Motors and Panasonic have announced that they will be joining forces to build a large-scale battery manufacturing facility in the United States. To be known as a Gigafactory, the plant will enable Tesla to continuously reduce the cost of long-range battery packs and manufacture them in a volume that will allow the company to meet its vision of advancing mass market electric vehicles.

As a principal partner, Panasonic will utilise half of the manufacturing space to build lithium-ion cells and will invest in the equipment, machinery and other manufacturing tools required based on mutual approval. Tesla will then take these cells and assemble battery modules and packs, which, along with key suppliers producing the required precursor materials, will occupy the other half of the facility.

The carmaker will also prepare, provide and manage the land, buildings and utilities at the site, with Reno, Nevada reportedly being the company’s first choice as a location. Both Tesla and Panasonic will continue deliberations on the implementation of the joint venture, including sales, operations and investment.

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The plant will be producing battery packs for Tesla’s upcoming entry-level model, the Model 3. To meet the expected demand, the company will continue to purchase battery cells from Panasonic’s factories in Japan.

Optimised manufacturing processes driven by economies of scale previously impossible to achieve of will help lower costs. Furthermore, the plant will manufacture cells designed specifically for electric vehicles both in size and function, co-locate suppliers on-site to eliminate packaging, transportation and duty costs and be built at a location with lower utility and operating expenses, all of which will save yet more money.

The Gigafactory will produce cells, modules and packs for Tesla’s electric vehicles – including its upcoming entry-level model, the Model 3 – and for the stationary storage market. It is planned to produce 35GWh of cells and 50GWh of packs annually by 2020, and is projected to employ about 6,500 people by 2020.

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“The Gigafactory represents a fundamental change in the way large-scale battery production can be realised,” said Tesla’s chief technical officer and co-founder JB Straubel. “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.”

“We have already engaged in various collaborative projects with Tesla toward the popularization of electric vehicles,” added Panasonic’s executive vice president Yoshihiko Yamada. “I believe that once we are able to manufacture lithium-ion battery cells at the Gigafactory, we will be able to accelerate the expansion of the electric vehicle market.”