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Tesla begins producing battery cells at its Gigafactory

Cells for the Model 3 will follow during the second quarter of 2017.

Batteries are coming for the Model 3.

Tim Stevens/Roadshow

Telsa today announced that mass production of lithium-ion battery cells has begun at the Gigafactory located outside of Reno, Nevada. The 2170 cell, which Tesla developed together with Panasonic, are used in Tesla's Powerwall 2 and Powerpack 2 energy packs. Cells for Tesla's upcoming Model 3 sedan are slated to begin production during the second quarter of this year, which should be promising news for the nearly 400,000 people who have preordered the new car.

The $5 billion factory is a joint effort between Tesla and Panasonic, which is being built in phases. Today, the factory is less than 30 percent complete, but already features 4.9 million square feet of operating space across numerous floors. By 2018, Tesla says the Gigafactory will produce 35 gigawatt-hours per year of lithium-ion battery cells, which will nearly match the rest of the battery production in the world combined.

Having the Gigafactory up and running is a major piece of the Model 3 puzzle. The affordable follow up to the Model S and Model X will benefit from lower battery costs as production ramps up all under one roof, and as more efficient manufacturing techniques are discovered. Last July, Tesla CEO Elon Musk, said that cost savings on the battery packs with the Gigafactory could be greater than 30 percent.