Tesla has revealed plans for a $5 billion "Gigafactory" that will be used to produce lithium-ion batteries, according to the EV maker.

The factory will produce enough batteries to power approximately 500,000 vehicles every year.

Tesla thinks the factory may eventually be able to drive down the cost of battery packs and make electric vehicles more affordable sometime in the near future.

Tesla said by 2020 it expects to "produce more lithium-ion batteries annually than were produced worldwide in 2013."

The Model S company has a goal of producing a mass-market EV by 2017. By then, Tesla hopes to unveil the Tesla Gen III sedan, which will likely be sold for approximately $35,000, half the cost of the current base Tesla Model S.

"By the end of the first year of volume production of our mass-market vehicle, we expect the Gigafactory will have driven down the per kWh cost of our battery pack by more than 30 percent," Tesla said this week in a blog post.

The factory will employ around 6,500 workers.

A location for the plant has not been selected yet, but the automaker has narrowed it down to four states: Arizona, Nevada, New Mexico and Texas.

Tesla will use renewable sources of energy, like wind and solar, to help run the plant.

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