Chris Woodyard

USA TODAY



Electric-car maker Tesla Motors and electronics giant Panasonic announced Thursday that they have signed a deal to build a huge battery plant in the U.S. — a "Gigafactory."

Tesla has previously talked openly of Panasonic's involvement with the project, which it needs to make lower-cost advanced batteries for a mass-market electric car, the Model 3, due later this decade. Tesla says the plant will require investment of up to $5 billion and employ up to 6,500.

Given the project's huge scope, states named as finalists are lined up to try to attract the project. They include California, Nevada, Arizona, New Mexico and Texas.

The new agreement lays out far more specific details than were disclosed previously. Major deal points:

•Tesla will acquire and manage the land, buildings and utilities, leaving Panasonic to invest in equipment and make the batteries. Tesla, however, will assemble Panasonic batteries on site to create battery packs that power its cars.

•A network of suppliers is being created to make sure all the needed materials are available at the plant..

•Tesla says it will continue to purchase batteries from Panasonic's factories in Japan.

•The Gigafactory will be managed by Tesla, with Panasonic as its top partner. Half the floor space will be devoted to Panasonic's battery-making activities. Suppliers and Tesla's battery pack operations will take up the other half.

The integrated nature of the plant will make it a breakthrough, lowering the cost of batteries, Tesla and Panasonic say.

"The Gigafactory represents a fundamental change," says JB Straubel, Tesla's chief technical officer, in a statement. "Not only does the Gigafactory enable capacity needed for the Model 3, but it sets the path for a dramatic reduction in the cost of energy storage across a broad range of applications."

Panasonic views the plant as a chance to expand in what it hopes will be growing market for electric cars. The batteries will be cheaper because of economies of scale.

"Panasonic's lithium-ion battery cells combine the required features for electric vehicles such as high capacity, durability and cost performance," says Yoshihiko Yamada, a Panasonic executive vice president in a statement. "And 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."

The announcement preceded Tesla's earnings announcement later Thursday.