People think that electric vehicles are inconvenient -- they take too long to charge and cost a lot of money. Tesla Motors (NASDAQ:TSLA), maker of high-performance electric vehicles, is taking an aggressive approach to make them more affordable and practical.

Tesla's vehicles operate on a bundle of cylindrical lithium-ion battery cells. The problem? The market for such cells is declining as other EV makers, and even consumer good manufacturers, are moving to larger, flatter cells with more power per cell.  Battery consumers are continuing to bid down the price of the flat battery, and battery factories are receiving government subsidies and are currently operating well below full capacity.

Use only the best
Tesla's commitment to the cylindrical battery seems strange; however, the battery pack used in the Model S produces energy more efficiently. The battery type used in the Model S packs two to three times more energy than the next competing battery. The battery also juices up quickly with a 50% charge attained in 20 minutes. 

The efficiency of Tesla's lithium-ion battery allows for better acceleration and mileage. For example, the Nissan Leaf accelerates zero to 60 miles per hour in 10 seconds and travels 70 miles per five-hour charge. Tesla's Model S accelerates from zero to 60 in about six seconds and travels up to 230 miles.  

It is also essential for EVs to effectively draw heat away from the battery cells, and Tesla's small cell size (18-mm diameter by 65-mm length) allows for proper and effective heat dissipation. Finally, the lithium-ion battery format, unlike others, is not damaged by charging the battery prior to fully draining it. 

While the cost for the flatter battery remains higher than Tesla's format, the cost effectiveness of the two is expected to level. Concerns could arise for Tesla as more suppliers shift to satisfy the demand for the flatter cell.

The solution: Tesla's planned battery Gigafactory.

The largest battery factory ever
The Gigafactory will cover approximately 10 million square feet in the southwestern U.S. and will be operating by 2017. By 2020, Tesla plans that the $5 billion investment will produce more battery power than current worldwide production. The company seeks to outfit a fleet of 500,000 vehicles in one year due to this vertical integration.

It's a risky proposition.

That's a lot of batteries
Tesla sold over 22,400 vehicles in 2013, and it plans to grow sales 2,200% in just seven years. It's difficult to comprehend, especially considering that EVs represent less than 1% of all vehicles on American roadways. However, total EV production is expected to increase 60% in 2014, from 242,000 to 403,000, according to the LA Times

Yet, uncertainty still looms.

Finding partners
The head of LG's battery research division expressed concern about Tesla's ability to obtain materials from battery industry suppliers because of the cylindrical format Tesla uses. As this type of battery goes out of style, Tesla's suppliers would be meeting the demand of a single customer and for a single application. That's quite a risk.

If Tesla does not meet its goals, its suppliers will be left with excess product that they may not be able to sell. Therefore, many will shift with the market and provide the flatter format cells.

Battery maker Panasonic Corporation (NASDAQOTH:PCRFY), however, will likely partner with Tesla to build the planned Gigafactory. Panasonic is not new to the space as it has been partnered with Tesla for over five years and has provided over 2 billion battery cells.

According to plan, the factory will supply enough batteries to outfit Tesla's goal of 500,000 vehicles a year at a ticket price of approximately $70,000 comes to about $35 billion in revenue per year for car sales alone, compared to just under $2 billion in revenue for 2013. Assuming revenue is indicative of return on investment, Gigafactory investors will be well compensated.

Risk made less risky
Currently, the cost for the flatter format battery is high. Although cost per kilowatt-hour for batteries is a key secret among EV manufacturers, it has been estimated that flatter battery costs around $400 per kWh compared to the cylindrical cost of about $200 per kWh. 

Rather than reengineer its vehicles to use the new format and compete with the shifting market, Tesla's Gigafactory will provide the superior battery cells  for its vehicles without risking to loose battery suppliers to the shift and by reducing current battery costs by 30%. 

The Gigafactory is risky. If Tesla cannot build the factory, investors must be very wary. However, if the factory succeeds, Tesla and its partners will be able to better penetrate the battery market in the near future and balloon sales. 

Benjamin Marasco has no position in any stocks mentioned. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.