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The Tesla Model S electric sports sedan outsells traditional premium competitors in some markets (Photo: Tesla)

Tesla and Panasonic, seeking to lower costs for a core component of electric vehicles, will jointly build a large-scale battery plant in the US, the two companies said in a press statement.

Tesla will prepare, provide and manage the land, buildings and utilities, while Panasonic will manufacture cylindrical lithium-ion cells. The Japanese electronics group will also invest in equipment, machinery, and other manufacturing tools.

The two companies said the so-called Gigafactory will help lower the cost of long-range battery packs and boost battery volumes to the levels Tesla needs to build increasing numbers of its electric sports sedans. Tesla will continue to buy battery cells from other Panasonic factories in Japan.

Tesla said the new factory will allow the electric car maker to push costs down in key areas. "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," Tesla CTO JB Straubel said in a press statement.

Panasoic Vice President Yoshihiko Yamada cited the beneficial potential of the factory for electric cars in general. "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," he said.

The two companies said economies of scale will be key in the cost reduction drive. But they stressed that, in addition to optimized manufacturing processes, they also aim to lower battery costs by designing battery cells specifically for electric vehicles. An on-location supplier part at the factory will be a further factor in lowering costs.

The Gigafactory is planned to produce 35GWh of cells and 50GWh of packs per year by 2020. The facility is expected to employ about 6,500 people by 2020.