Image: Norio Nakayama Image: Norio Nakayama

Tesla kicked off production at its giant Gigafactory this week. The implications are not that significant, just enough to change the world, that's all.

The big switch-on has happened. And if Tesla can meet its targets, by the second quarter of next year, it will be producing almost as many lithium-ion battery cells as the rest of the world put together.

The giant Gigafactory is not finished, far from it. As Tesla put it: "The Gigafactory is being built in phases so that Tesla, Panasonic, and other partners can begin manufacturing immediately inside the finished sections and continue to expand thereafter. "

So far the factory has a footprint of 1.9 million square feet, which houses 4.9 million square feet of operational space across several floors. Tesla said "And we are still less than 30 percent done. Once complete, we expect the Gigafactory to be the biggest building in the world."

But, and this is where it gets clever, Tesla says "Our phased approach also allows us to learn and continuously improve our construction and operational techniques as we continue to drive down the cost of energy storage."

And that really is the key. It has been suggested that for the cost of an electric car to be comparable to the cost of an internal combustion engine car the kilowatt per hour cost of a lithium-ion battery needs to fall below €100. And we are not there, yet.

But the cost has fallen at an extraordinarily rapid pace, from around $1,000 a kilowatt hour in 2008 to around $200 in 2016.

Tesla claims to have cut the cost further still, but says it needs economies of scale. As CEO Elon Musk said last year when he unveiled what he called Master Plan, Part Deux, "Without economies of scale, anything we built would be expensive, whether it was an economy sedan or a sports car. While at least some people would be prepared to pay a high price for a sports car, no one was going to pay $100k for an electric Honda Civic, no matter how cool it looked."

So Tesla needs scale, which means it needs to make a lot of batteries and a lot of cars, but it also needs to find other sources of demand for the batteries. Most of the batteries being made at the moment at the factory are for Tessa's batterywall- designed to act as a back-up for intermittent sources of energy, for example, solar or wind. And it also helps that it has partners, such as Panasonic.

Tesla said: "By bringing down the cost of batteries, we can make our products available to more and more people, allowing us to make the biggest possible impact on transitioning the world to sustainable energy."