Tesla’s $5 Billion Gigafactory Just Hit a Major Milestone

Tesla has started mass producing lithium-ion battery cells at its massive $5 billion factory in Nevada, marking a milestone for the company as it transitions from automaker to sustainable energy company.

Tesla announced in a blog post Wednesday that its 2170 cell, a cylindrical battery designed and engineered with Panasonic, is officially in production. The batteries produced over the next several months will be used in Tesla’s energy storage products, the Powerwall 2 and Powerpack. The Powerwall 2 is a battery for homes designed to store energy generated by solar panels.

In the second quarter, the so-called gigafactory will start making battery cells for its $35,000 Model 3 sedan. Production of the Model 3 is expected to begin in mid-2017.

Tesla (TSLA) claims by 2018 the factory will produce 35 gigawatt-hours a year of lithium-ion battery cells, almost as much as the rest of the world’s battery production combined.

As production ramps up, Tesla and Panasonic say they will hire several thousand local employees in 2017. The factory will directly employ 6,500 people when it reaches peak production.

The factory, which is located in the Tahoe-Reno Industrial Center, is producing cells even though less than 30% of the structure is complete. The factory is being built in phases, an approach that allows Tesla and its partners to start making cells earlier. The factory is currently 1.9 million square feet. Tesla expects this to be the biggest building in the world once it’s complete.

Tesla has said that the factory is expected to reduce the per-kilowatt-hour cost of its lithium-ion battery packs by more than 30% by the end of 2017, the first year of volume production.

That price decrease is essential for CEO Elon Musk to make a mass-market electric car 50% cheaper than its luxury Model S.