While Tesla Motors closes in on a partnership deal with Panasonic for its $5 billion battery factory, the electric automaker prepares to break ground on at least two sites over the next several months. One of them could be in California.
FORTUNE — Tesla Motors TSLA hasn’t named the future home of its $5 billion battery factory. But the choice just became much harder to predict.
The electric automaker has said that it plans to break ground at least two, possibly more, locations over the next several months. Until yesterday, California was not among the contenders.
“We’re going to move forward with breaking ground on multiple sites in order to minimize the risk of completion of the Gigafactory,” CEO Elon Musk said during a call to discuss the company’s first quarter earnings. “We expect to break ground on the first of those probably next month. And then shortly thereafter, maybe a month or two after that, we’ll break ground on the second one.”
Tesla initially said it was evaluating 500- to 1,000-acre sites in Arizona, Texas, New Mexico, and Nevada as four potential locations for the factory, which will employ about 6,500 people. Now California is back on the short list.
“It’s sort of still improbable, but it is back in the running,” Musk said.
California was left off the initial list because of concerns of the time it would take to complete the permitting process for the battery factory.
“This is a large greenfield construction project and California has quite a complex and lengthy process for approval of greenfield sites,” said Musk. “We couldn’t afford waiting a year or more for permits to proceed.”
Other states have a much more streamlined approach, said Musk, who also noted that the cost of operating in a particular state would be considered when determining the final location for the Gigafactory.
Musk also announced during the quarterly earnings call that Tesla has signed a letter of intent with Panasonic to be a partner in its battery facility.
“For us, that’s actually not that big of a deal because our expectation has always been that Panasonic would be the partner with the Gigafactory, and I believe that’s been Panasonic’s intent,” Musk said.
The Palo Alto, Calif.-based company expects to reach a final agreement with Panasonic, its existing current battery cell supplier, in the latter part of the year, said J.B. Straubel, Tesla’s chief technology officer.
Panasonic spokesman Jim Reilly confirmed the letter of intent and said the company is studying participation in the Gigafactory.
On Feb. 26, Tesla revealed the first details of a 10-million-square-foot, possibly two-level facility that will be designed to produce more lithium-ion batteries annually by 2020 than were made worldwide in 2013. Tesla estimates that the plant will have the capacity to produce 50 gigawatt hours of battery packs a year, which will be used for its Model S luxury sedan and a cheaper next-generation vehicle intended for the mass market.
By 2020, Tesla estimates the facility will be able to make enough batteries to supply 500,000 vehicles a year. 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 necessary for Musk’s bid to make a car 50% cheaper than its luxury Model S, which starts at $70,000.
Tesla can achieve the 30 percent reduction in cost per-kilowatt-hour and maybe even exceed that number, Musk said.
In an effort to reduce costs, Tesla is examining pre-cursor materials, particularly nickel. Tesla is talking with nickel mining companies in Canada to find innovative ways to reduce the cost, Musk said.
The Gigafactory is just one — albeit a large — piece of its rapid expansion plan.
The company, which reported a net loss of $49.8 million for the first quarter as it expands capacity at its automobile factory and develops the Model X SUV, plans to invest up to $850 million in capital expenditures this year.
This year, Tesla plans to install 200 more of its fast-charging stations globally, increase the number of service centers and stores 75 percent over last year and launch the right-hand drive Model S in the UK, Japan and Hong Kong.
The company, which delivered its first Model S cars to customers in China, said in a letter to shareholders that it plans to expand in Asian country as fast as possible.
“They’re more ambitious than other auto startups, primarily because they went beyond the automobile almost since their inception, said John Gartner, research director at Navigant Research. “They’re operating a charging network, becoming a developer and seller of battery backs and drivetrains and an energy servicing company. Now they’re swimming in a deeper, more competitive market.”