As Tesla’s Supercharger network expands and Model S sales continue to grow, so too does the company’s need to find a more economical battery solution. A proposed technology amalgamation in the form of the Gigafactory could theoretically reduce per kWh and lithium-ion costs by over 30 percent by 2020.

Pitched as a "forward looking project," Tesla’s proposed Gigafactory will, if successful, produce the same number of lithium-ion batteries by the year 2020 as the entire world’s output in 2013. According to Tesla, by working with various technology and battery partners on this large scale project, the company could significantly reduce production costs by achieving optimal economies of scale.

The basic business concept behind the Gigafactory is to reduce overall costs associated with logistical waste by having manufacturing and similar processes all located in the same place.

Projected figures from Tesla show the gigantic factory producing 500,000 units per year by 2020, with expected battery cell output of 35 GWh/yr and battery pack output figures of 50 GWh/yr. Current global battery output, from a variety of manufacturers, sits at just under 35 GWh/yr.

Tesla reports that by the end of its first full production year, the Gigafactory could reduce the cost per kWh of a battery pack by around a third.

Though the project is still hypothetical, Tesla is already looking for real estate to house the Gigafactory in one of four southern US states. Space requirements for the factory, and its supplemental wind and solar stations, are reported to be between 500 and 1000 acres (up to 400 hectares). Total space requirement for the factory itself is projected to be 10 million square feet (929,000 sq m), housing up to 6,500 employees.

Source: Tesla