Will the wonders of Elon Musk never cease to amaze us?

Known for his industry-challenging ideas, Musk unveiled perhaps the crown jewel in his attempt to revolutionize the auto industry as we know it by announcing, just a little over a week ago, his company's intentions to build a 'Gigafactory.'

The way Musk envisions it, this Gigafactory has industry-changing potential. The goal, according to a blog post from Tesla Motors (TSLA -4.02%) is to build a large-scale battery manufacturing facility, in cooperation with partners, to "achieve economies of scale, minimize costs through innovative manufacturing, and reduction of logistics waste." 

A deeper examination of the Gigafactory is provided by Tesla (link opens a PDF), and the goals being set are nothing short of lofty. In 2013, there were less than 35 GWh/year of production put out by all battery cell developers combined! By 2020, Tesla's Gigafactory is expected to be producing 35 GWh/year of production annually by itself! Furthermore, Tesla anticipates, with its Model S sedan, Model X SUV, and economical Model E, to be producing some 500,000 vehicle annually by 2020, which would be up markedly from the 35,000 it's forecasting in 2014.

Source: IIT Takeshita via Tesla Motors. 

What Tesla has proposed here isn't a whimsical flash-in-the-pan idea -- it's going to happen. The question really should be, can it succeed? Despite being short shares of Tesla Motors at the moment in my personal portfolio, I do see a number of opportunities that this Gigafactory could offer Tesla which would be incredibly positive for the electric vehicle industry and the company itself. On the other hand, this utopian idea isn't without its own unique risks.

Today, we're going to look at five opportunities that I believe have the potential revolutionize Tesla. Tomorrow I'll cover those five terrifying risks that could also cause this utopian dream to come crashing down.

In no particular order, these five opportunities are:

1. Cheaper batteries = cheaper cars
The most obvious benefit of building a factory capable of mass-producing lithium-ion batteries quickly and cheaply is that it'll drive the cost for EV battery packs down significantly and make Tesla's EV's more affordable.

Source: Tesla Motors.

One of the biggest drawbacks of the Model S is its current price point, which begins around $70,000 and works its way up. Put simply, a majority of the population is priced out of owning a Model S. However, more efficient and streamlined production will, according to Tesla's estimates, reduce its battery pack cost/kWh by greater than 30% by the time the Model E is introduced in 2017. This means more attractively priced EVs, and possibly even lighter EVs with more space if capacity levels are improved through innovation.

2. Diversifies Tesla's revenue stream
Another important aspect of the Gigafactory is it could move Tesla beyond just being an auto manufacturer. If Tesla can make good on its promise to efficiently produce lithium-ion batteries at an accelerated pace relative to its rivals, it would hold a competitive edge that could garner it orders from other automotive companies or the energy industry.

The benefit here would be that the auto industry is naturally cyclical, but the energy sector tends to see relatively stable demand in expansionary or recessionary economies. By expanding Tesla's economic moat into LI-production Tesla may be able to weather a recession far better than its peers through revenue stream diversification.

3. Spreads the costs of the factory build-out beyond just Tesla
Tesla is being smart about its venture into an LI-battery factory and understands that two or more brains is going to be better than one. The company hasn't exactly announced a development partner as of yet, but rumor has it that Panasonic (PCRFY) could be in the lead, since it's the current partner for the battery going into its Model S.

Ultimately, Tesla pegs the total capital expenditures of its factory at $4 billion-$5 billion through 2020, with Tesla expecting to share these expenses with its partners. Obviously this means giving up some profit, but it also means not having to shoulder the burden of potentially backbreaking costs. Think of this as Tesla's way of combining its superior EV knowledge with the superior LI-battery technology knowledge of a partner, or number of partners, and splitting the costs, and possible profits, down the middle. 

4. Reinforces a reliance on alternative energies
One of the more notable aspects of the Gigafactory is that it'll be completely powered by solar panels and wind farms in one of the four states (Arizona, Nevada, New Mexico, and Texas) currently in contention for the Gigafactory's location. This immense solar and wind project will only help to reinforce the importance of lower-cost alternative energies, will push forward their real-world viability, and could also serve as a nice jumping off point for Elon Musk's SolarCity (SCTY.DL), which may be called upon to provide the panels for this grandiose project.

Source: U.S. Air Force, Wikimedia Commons.

If there was any shred of doubt that Tesla is going to appeal to the socially conscious investor, its plans to power the Gigafactory through solar and wind farms sealed the deal. And let's not also forget that solar and wind also have lower costs over the long run, meaning once the initial hefty costs are out of the way, the Gigafactory should be far less costly on an energy usage basis than its rivals.

5. Remains first-in-class
Finally, the Gigafactory would allow Tesla to maintain its rite of passage as the first-in-class EV pioneer. As my Foolish colleague and auto analyst John Rosevear noted in December, Tesla was the first company to successfully introduce a new auto brand in 50 years. Its electric range on the Model S is far superior to its peers, and it's able to utilize that comparative first-in-class advantage to its benefit through incredible pricing and branding power.

Although Tesla wouldn't be the first LI-battery manufacturer by any means, its output projections from the Gigafactory would put its production potential so far ahead of current LI-battery factories that it's not even funny. This first-in-class way innovation could afford Tesla big margins and remarkable pricing power.

Tomorrow we'll look at five risks which are generally flying under-the-radar that have the potential to turn the Gigafactory into a monumental failure.