UPDATE 1-Tesla picks Nevada for $5 billion battery plant

Thu Sep 4, 2014 8:14pm EDT

(Adds details of deal, size of Nevada incentive package, Tesla CEO comments)

By Sandra Chereb

CARSON CITY, Nevada, Sept 4 (Reuters) - Tesla Motors Inc has selected Nevada as the site for a $5 billion battery factory that will be key to its next generation of electric cars, Nevada Governor Brian Sandoval announced on Thursday.

The California-based electric car maker is still hammering out the final details on the plant that will crank out cheaper and more efficient battery packs for Tesla's future cars, including the $35,000 Model 3 that is due in 2017.

Japan's Panasonic Corp will produce lithium ion cells for battery packs and will fund part of the cost of the plant, which is considered an important part of Tesla's ambitions of taking on major automakers. California, Texas, Arizona and New Mexico were also in competition for the plant.

The state of Nevada said it will give Tesla more than $1 billion in tax breaks and abatements over a 20-year period.

Tesla Chief Executive Officer and co-founder Elon Musk said Nevada's offer to Tesla "was not the biggest incentive package" but said that the state was picked because it "can do things quickly" and "get things done."

The Nevada package is subject to approval by the state's legislature.

The factory's planned site is in an industrial park in Storey County, about 15 miles east of Reno, Nevada. Only about 4,000 people live in Storey County.

In July, Musk told investors that 40 percent to 50 percent of the cost of a lithium-ion battery plant would be covered by Tesla, with Panasonic funding between 30 percent to 40 percent, and the state where it is located 10 percent.

"Other industrial partners" will provide between 10 percent and 20 percent of the cost of what the company called the "Tesla Gigafactory," Musk said in July.

The loss-making company expects to build more than 60,000 cars in 2015, after spending heavily this year to update and expand its existing Fremont, California assembly plant.

The automaker has accelerated the expansion of the Fremont plant, which builds the $70,000-plus Model S sedan and will add a companion crossover, the Model X, next spring. Musk said the plant now can build up to 1,000 cars a week, and will double that by the end of next year.

Musk confirmed on Thursday that the company plans to have the mass-market Model 3 ready in three years. (Reporting by Sandra Chereb; Editing by Bernard Orr)