Tesla is planning a total of five Gigafactories, where it will manufacture solar panels and battery systems for both its electric vehicles and for home and commercial energy storage.

"Later this year, we expect to finalize locations for Gigafactories 3, 4 and possibly 5," the company stated in a letter to shareholders.

Tesla Tesla will become the largest manufacturer of lithium-ion batteries in the world once its Gigafactory kicks into full swing.

Tesla has already begun installing Model 3 manufacturing equipment in its Fremont, Calif. plant and at Gigafactory 1 in Reno, Nev. It's first Gigafactory is already producing battery cells for its energy storage products, the Powerwall 2 and Powerpack 2; they have the same form-factor as the cells that will be used in Model 3 sedan, the company said.

Tesla's Gigafactory 2 is located in Buffalo, N.Y. and is expected to open in the second half of 2017, when it will begin production of solar panels and shingles.

Ahead of the launch of its Model 3 sedan later this year, Tesla is planning to re-engineer and expand its manufacturing operations as it anticipates a major uptick in sales of its most affordable all-electric car, it said. The news of the shareholder letter was first reported in The Verve.

This month, Tesla began building Model 3 prototypes; it plans to begin production of the sedan, which has a base price of $35,000, in mid-2017, the company said.

Tesla Motors The all-glass roof of the Model 3.

Tesla expects to produce about 5,000 EVs per week in the fourth quarter of 2017 and plans to increase that number to 10,000 per week in 2018.

"Initial crash test results have been positive, and all Model 3-related sourcing is on plan to support the start of production in July," Tesla said in its letter. "Model 3 vehicle development, supply chain and manufacturing are on track to support volume deliveries in the second half of 2017."