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Tesla finalizing plans for new battery factory that could supply 500,000 cars by 2020

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PALO ALTO, Calif. - Electric car maker Tesla Motors said Wednesday it's considering sites in Nevada, Arizona, New Mexico and Texas for a massive battery factory that would employ around 6,500 people.

The company didn't immediately name the locations it's considering in those states. Tesla plans to start construction this year and complete the factory — which it dubs its "Gigafactory" — in 2017.

Tesla's share rose nearly 3 per cent to $259.90 in after-hours trading.

The factory would supply lithium-ion batteries to Tesla's Fremont, Calif., assembly plant.

Palo Alto-based Tesla says it will invest $2 billion in the 10 million square foot factory, which will cost between $4 billion and $5 billion. Its partners will invest the rest. The company didn't identify those partners Wednesday, but its current battery supplier, Japan's Panasonic Corp., is expected to be among the investors.

Panasonic signed a deal last fall to supply Tesla with 2 billion battery cells over the next four years. But Tesla has fretted that current battery supplies won't meet its future demands.

The new factory will provide enough batteries to supply 500,000 vehicles by 2020, Tesla said. Tesla expects to produce 35,000 vehicles this year.

Tesla currently sells just one vehicle, the Model S sedan, which starts around $70,000. But it plans to begin making a crossover, the Model X, later this year, and wants to bring a lower cost, mass market vehicle to market in 2017. Tesla said the factory would help lower its battery costs by around 30 per cent.

Tesla also announced Wednesday it plans to raise $1.6 billion in a debt offering. The proceeds would help finance the new factory and the lower cost vehicle.

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