Tesla Motors' proposed "gigafactory" to make lithium-ion cells and battery packs for electric cars won't just benefit drivers; it will also benefit the state where it's located.

With an estimated 6,500 jobs in the balance, the gigafactory is one of the larger job-creating manufacturing projects in recent years.

Tesla originally named four finalists for the project--Arizona, Nevada, New Mexico, and Texas--but California's decision to speed up the permitting process and offer incentives has put it in the running as well.

2014 Tesla Model S

competition between the five states is heating up , but there isn't a definite leader so far, according to a new report in the San Jose Mercury News.

Tesla recently completed excavation work at a site in Reno, Nevada, but the carmaker says it's still evaluating sites in the four other finalist states.

Tesla plans to choose a site for the "first" gigafactory--there may be more than one--within the next few months. It expects the winning state to cover roughly 10 percent of the estimated $5 billion total cost.

ALSO SEE: Tesla's Lithium-Ion Battery Gigafactory: What You Need To Know

In addition to help underwriting construction costs, Tesla is looking for nearby rail connection, access to a skilled workforce, and enough electricity to power the gigafactory.

Close proximity to high-capacity electric transmission lines will be a plus. And just as states are competing to offer the best incentive package, so utility companies will soon be competing to offer Tesla preferred rates.

Project Tiger site at USA Parkway Business Park, Reno--for Tesla gigafactory? [photo: Bob Tregilus]

waive certain environmental rules was persuasive enough to get the Golden State into the competition.

MORE: Tesla, Panasonic Sign Gigafactory Pact; Nevada Site Work Already Underway?

Tesla is on a tight schedule: CEO Elon Musk has said the company's planned smaller, $35,000 Model III electric sedan can't go into production if the gigafactory isn't up and running to produce its battery packs.

The Model III is set to debut in 2017, around the time the gigafactory is supposed to begin operating at full capacity.

However, that date appears to depend on whether Tesla can begin construction before the end of the year.

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