Tesla has announced plans to build a "Gigafactory" to mass produce lithium-ion batteries for their upcoming entry-level model which will arrive in approximately three years.

Tesla has announced plans to build a "Gigafactory" to mass produce lithium-ion batteries for their upcoming entry-level model which will arrive in approximately three years.

Set to be built with "strategic battery manufacturing partners," the massive factory will enable the company to drastically reduce the cost of lithium-ion batteries thanks to economies of scale, the reduction of logistics waste and optimization of co-located processes and reduced overhead. This will pay huge divides to customers as Tesla expects to drive down the "per kWh cost of battery packs by more than 30 percent."

The plant is expected to be built on 500 to 1000 acres of land in Arizona, Nevada, New Mexico or Texas to make use of renewable solar and wind energy. The plant is expected to cover approximately ten million square feet, employee about 6,500 people and construct new batteries from raw materials.

If everything goes according to plan, construction will begin later this year and the first batteries should roll off the line in early 2017. By 2020, Tesla wants the Gigafactory to produce approximately 500,000 batteries annually.

To help fund the plant, Tesla will raise approximately $1.6 (€1.1) billon through a convertible note offering. More details about the offering can be found in the press release.

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