Photo via Tesla.

Photo via Tesla.

Panasonic and Tesla Motors have signed an agreement to build a large-scale manufacturing plant in the U.S., which will be known as the “Gigafactory,” to produce Tesla's next-generation battery.

Tesla will prepare, provide and manage the land, buildings and utilities, while Panasonic will manufacture and supply cylindrical lithium-ion cells and invest in the associated equipment, machinery and other manufacturing tools based on their mutual approval, Tesla has announced.

The location of the new $5 billion Gigafactory is still being determined. Tesla is asking states for bids on the site that claims to hire an estimated 6,500 workers by 2020.

However, Tesla did acknowledge it has broken ground on a potential site for the new factory near Reno, Nevada. Other top contenders for the battery factory are California, Texas, New Mexico and Arizona.

A network of supplier partners is planned to produce the required precursor materials. Tesla will take the cells and other components to assemble battery modules and packs. Tesla will still purchase the battery cells in Panasonic’s factories in Japan.

The Gigafactory will be producing batteries for Tesla’s Model 3, the company’s lower-priced electric vehicle. Tesla plans to unveil the Model 3 in 2016 and put it on sale by 2017. The vehicle is expected to retail for $35,000, Auto Express has reported. The Model 3 had initially been named the Model E.