Riding on the success of its Model S all-electric sedan, Tesla Motors has formalized an agreement with Panasonic – whose batteries power the Model S – to build a “large-scale battery manufacturing plant in the United States known as the Gigafactory,” the companies announced this week.

The agreement calls for Tesla to acquire “the land, buildings and utilities” and for Panasonic to invest in the machinery, equipment and tools needed to produce the lithium-ion batteries.

According to Daily Tech, reports suggest Panasonic’s initial investment will be in the $200-300 million range but could eventually top $1 billion depending on how well Tesla vehicles sell.

“Given the high degree of interest in the factory in both Japan and the United States, we wanted to show our intent by signing an agreement as soon as possible,” said Panasonic’s Chief Financial Officer Hideaki Kawai. “But a decision on investment will take a little longer.”

Tesla plans to invest $2 billion in the factory through 2020 and with investors contributing $2-3 billion, the total investment could be $4-5 billion.

The two companies have not announced potential locations for Gigafactory, but several southwestern U.S. states – California, Nevada, New Mexico, Texas and Arizona – are hoping to attract the business to their locale. Tesla expects to create some 6,500 jobs by 2020 at the plant.

The Gigafactory will require 500 to 1,000 acres of land and 10 million square feet. At full operational capacity, it would produce 35 Gwh of cells and 50 Gwh of battery packs annually.

Tesla’s Model S flagship is selling at a brisk pace, with 6,457 cars sold in the first quarter, 7,500 deliveries in the second and the anticipated 2014 production total expected to reach 35,000 vehicles. Plans are also under way for the roll-out of the new Model X, which will be assembled in the same Fremont, Calif., factory as Model S.