Tesla Motors Inc. (Nasdaq: TSLA) Chief Executive Officer Elon Musk had been hinting at the Tesla Gigafactory for months, and this week he delivered more of the information investors have been craving.
The lithium ion battery-producing Gigafactory is expected to cost the automaker $5 billion to construct and will employ approximately 6,500 people.
Tesla is currently searching for locations in Arizona, Nevada, New Mexico, and Texas. The site is expected to be between 500 and 1,000 acres in size. A final location has not yet been picked.
While the size and price of the factory has captured the headlines, it's the output capacity of the plant that has captured investors' imaginations…
Tesla Gigafactory's Output Capacity
Tesla announced in its Q4 earnings report that because of a production bottleneck its current production of Model S sedans is capped at 600 per week. By the end of 2014, the company expects to up that production to 1,000 vehicles weekly.
The bottleneck stems from lithium battery production, which is expensive and time-consuming. That's where the Tesla Gigafactory comes in.
Upon completion, the plant is expected to produce enough lithium ion batteries to power 500,000 vehicles annually.
Not only will the battery megafactory increase battery production, it will also decrease the cost of producing electric-powered vehicles.
Elon Musk has previously mentioned his plans to produce a more modestly priced version of the signature Tesla Model S, and the Gigafactory will be key to those plans.
"The Gigafactory is designed to reduce cell costs much faster than the status quo and, by 2020, produce more lithium ion batteries annually than were produced worldwide in 2013," the company stated.
The increased production from the Gigafactory will have a major impact on the auto industry, but it's the company's impact on other markets that could send the stock soaring…