About 23 miles east of Reno, Nevada, sits one of the largest buildings in the world: Tesla's (NASDAQ:TSLA) Gigafactory. Elon Musk's electric-car maker built the enormous facility, which will have the largest footprint of any building in the world upon its completion in 2020, to mass-produce the batteries necessary to power its vehicles. That's crucial, because Tesla's production target of 1.5 million vehicles a year would demand more than the entire world's annual production capacity of lithium-ion batteries outside of the Gigafactory. This pivotal facility comes with a huge price tag: Tesla has spent $1.98 billion on it so far, and will invest billions more. 

Here's everything Tesla stock investors need to know. 

Location Tahoe Reno Industrial Center, Nevada
Estimated Final Square Footage 15 million sq. ft.
Estimated Final Cost $5 billion

Data source: Tesla, Inc. 

Rendering of Tesla's Gigafactory 1.

Image source: Tesla, Inc. Corporate Website.

Why Musk is building the world's biggest battery factory

Tesla's Gigafactory is a huge manufacturing facility where, in partnership with suppliers such as Panasonic, the battery packs for electric vehicles are assembled. More recent plans call for the Gigafactory 1 (located outside Reno, Nev.) to also manufacture drive units and other components. TSLA broke ground on Gigafactory 1 in June 2014. The assembly of battery packs in the first portion of the facility (about 14% of the final) began in Q1 2017. Gigafactory 1, as its name implies, will likely be the first of many across the globe. The first Gigafactory has also been giga-expensive. Tesla has incurred costs of $1.98 billion as of June 30, 2017, with billions more likely.

The factory is pivotal to Tesla's future. To manufacture 500,000 cars per year, Tesla would need the world's entire supply of lithium-ion batteries. Since we also need batteries for television remotes and cell phones, the Gigafactory will make up for this enormous shortfall. Supplying the batteries necessary for mass electric car production. Tesla estimates that Gigafactory 1 will reduce the production cost for their electric vehicle battery packs by roughly 30%. This is of paramount importance. Battery costs below $100 per kWh represent the inflection point where electric cars become comparable to ones powered by fossil fuels. Its final capacity upon completion of the entire factory is 150 GWh/yr. This would enable Tesla to produce 1,500,000 cars per year. It will have the largest footprint in the world and, including all floors, will approach a total square footage of 15 million square feet.

Giga-history

The first public mention of the Gigafactory concept came in November 2013 during the company's third-quarter earnings conference call. Of the project, CEO Elon Musk said:

This is going to be a very green factory. There's going to be a lot of solar power. It's going to have essentially zero emissions and there are no toxic elements that are going to come out ... and we will build recycling capability right into the factory.

Tesla's internal plans predated comments (they had already investigated some 100 sites). This was the first time the world learned of the concept. It would not be easy, and Tesla was going to need help. So, in July 2014, it was announced that Panasonic had reached a basic agreement with Tesla to invest in the factory, estimated to cost $5 billion. Several states competed in attracting Musk's massive factory, including California, Texas, and Nevada. In the end, thanks to a combination of enormous tax incentives and land giveaways, Nevada's Tahoe-Reno Industrial Center (TRIC) won. The timing couldn't have been better. Preorders for Tesla's Model 3 surpassed expectations and led Panasonic to increase its investment in the factory.

Construction began immediately, and despite the fact that just two out of the 21 planned segments/blocks of the factory was completed, a grand opening was held on July 29, 2016. Musk waits for no one, and construction of the entire factory isn't expected to finish until 2020. Once complete, the factory will employ some 6,500 employees

In classic Elon Musk fashion, it wasn't long before a second Gigafactory was announced.

Gigafactory 2: Solar edition

Elon Musk wouldn't be Elon Musk without the juggling of multiple balls in the air. To wit, after inheriting a huge solar cell manufacturing facility in Buffalo, New York, via Tesla's acquisition of SolarCity, Musk renamed the solar factory Gigafactory 2. In partnership with the Research Foundation for the State University of New York and Panasonic for the construction of an approximately 1.0 million-square-foot manufacturing facility capable of producing 1.0 gigawatts of solar cells annually in Buffalo, New York, referred to as Gigafactory 2. The purpose of Gigafactory 2 is the production of 1.0 gigawatts-worth of PV cells and modules annually by 2019.

Tesla's Giga-future

Plans for a third, fourth, and fifth Gigafactory are already in the works. Tesla previously claimed that the third Gigafactory would be located in Europe, but where exactly is unclear. No matter where they are located, Musk plans to utilize robots and automation heavily. This is because, to Musk, the factory is more important than the cars it produces. Getting it right allows for the mass-production of millions upon millions of electric vehicles. Musk has also stated that Tesla's goal is to be "the best manufacturer on earth."

Elon Musk believes that it's not Tesla's cars that will make or break the company, but its manufacturing process. Given the amount of money being spent on its Gigafactories, investors should take him at his word.

Sean O'Reilly has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.