Tesla, Panasonic Ink Deal To Make Huge Battery 'Gigafactory'

The deal will help build a massive battery factory that Tesla says will produce 500,000 lithium batteries by 2020.

Tesla, Panasonic Ink Deal To Make Huge Battery 'Gigafactory'
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A new development could give the electric car the charge it needs to aggressively complete with standard gas-guzzling vehicles. (Via Getty Images)

It's been in the works for a while, but electric car maker Telsa Motors has finally inked a deal with Panasonic to build a gigantic $5 billion gigafactory to produce lithium batteries in bulk. (Via CNET)

Tesla said the new facility will also provide extra capacity needed for the Model 3 — which is expected to roll out in 2017 at about half the price of the Model S. 

The key ingredient that really put the deal in motion: producing batteries at such large amounts will, according to Tesla, trim costs by 30 percent over the next six years.

Which is enough that representatives from the car company said it would be able to meet its goal of pumping out 500,000 electric-car batteries in the same period. 

Forbes says that would amount to "more than the entire world wide production of lithium ion cells in 2013."

And with the massive 10,000-square-foot plant comes 6,500 new jobs by 2020 — enough to start a multi-state tug-of-war between Arizona, Nevada, New Mexico and Texas to house the facility. Those four states are Tesla's finalist locations for the plant. (Via Getty Images)

In a press release, Panasonic Executive Vice President Yoshihiko Yamada said the companies are actually working together on a number of projects to stimulate growth for electric cars. "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."

This is all begs the question: will this help Tesla's electric car really take off?

Bloomberg analysts are at least a little skeptical, calling out a weak Standard & Poor's credit rating in May coupled with dwindling national first quarter revenue making Panasonic's investment a "signficant risk." 

"We've seen North American revenues come down. They came down 47 perecent in the first quarter. ... Does that mean like California is saturated with Teslas? And, B, analysts are going to want to know if that's really just because you're ramping up your international business." 

And Fox Business points out this is kind of a make-or-break period for the car maker, as those sluggish first quarter numbers were mainly driven by higher costs from spreading themselves so thin with expansion in the U.S., U.K., Japan and Hong Kong.

A Kelley Blue Book senior analyst told the network, “This is a critical time for Tesla. When they really started to make headways with the success of the Model S, Tesla proved they should be taken quite seriously.”