Tesla Motors has just revealed that it has broken ground in Reno, Nevada for a potential "Gigafactory."

The company has entered into an agreement with Panasonic for constructing the giant battery plant, which is expected to be the largest in the United States.

The Gigafactory partnership, which has a value of $5 billion, may not be an even split between the two companies in terms of funding. Tesla CEO Elon Musk told Reuters that it will cover 40 percent to 50 percent of the total funds needed for the partnership.

According to the terms of the deal, Panasonic will be responsible for production equipment that will be used for manufacturing battery cells. Tesla, on the other hand, will be responsible for managing the Gigafactory. The company would also shoulder the costs for land, buildings and utilities for the facility, as well as provide investments for the production of battery modules and packs.

"In June, we broke ground just outside Reno, Nevada on a site that could potentially be the location for the Gigafactory... The final site for the first Gigafactory will be determined in the next few months, once we have full visibility and agreement on the relevant incentives and processes for enabling the Gigafactory to be fully operational to meet the timing for Model 3," the company said in a letter to shareholders.

The Model 3 is Tesla's upcoming electric car for the mass market. In an interview with British Magazine Auto Express, Tesla CEO Elon Musk said that the Model 3 will be launched by early 2017. The car, which is expected to have a price tag of $35,000, cost about half as much as the Model S. The lower price for the Model 3 is due to cheaper batteries that are expected to come from the Gigafactory.

During the second quarter of this year, Tesla reported a loss of $61.9 million, or 50 cents per share. The company registered the decline in spite of delivering 7,579 Model S vehicles, which is slightly higher than its forecast of 75,000 units. Tesla said that it is still on track to meet its projection of delivering 35,000 this year.

Once the Gigafactory becomes operational, it is expected to provide batteries for up to 500,000 Tesla vehicles per year. Aside from the Reno, Nevada site, Tesla is also evaluating locations in California, Texas, Arizona and New Mexico.