Tesla battery
Tesla's gigafactory will make the electric car manufacturer the world's largest lithium-ion battery producers. Creative commons

Electric vehicle manufacturer Tesla has announced plans to build the world's largest lithium-ion (li-ion) battery factory, capable of producing more battery power in one year than was produced globally during all of 2013.

The so-called gigafactory is expected to be completed by 2017 and will be built at an as-yet undisclosed location in the soutwest of the US.

The creation of the 10-million-square-foot factory would allow Tesla to generate its own in-house supply chain of battery packs for as many as half a million vehicles per year, as well as making the company the world's largest li-ion battery provider.

Alot of lithium

One challenge facing Tesla in its behemoth creation will be providing enough raw materials to keep up with the massive demand of the factory.

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Running at full capacity, analysts at Goldman Sachs predict the factory could consume up to 17% of the global supply of lithium.

At current rates of lithium extraction, this could actually help ease a forecast oversupply of the material.

"In terms of the actual production of these raw materials, we don't really have a concern for the supply of them," Cosmin Laslau, analyst at Lux research, told CNBC. "There will need to be some additional resources brought online, but as far as there being enough out there to support this, we think, 'Yes, yes there is.'"

A 'tremendous amount of risk'

For the factory to be a success, however, Tesla will need to be able to insure themselves against any potential price-swings in the global lithium market.

Energy research analyst analyst, Sam Jaffe, believes that the factory's creation is an "incredibly risky business move", suggesting one option for Tesla would be to do some form of price hedging on the commodities.

"They're bringing a tremendous amount of risk to their business by doing this," Jaffe told CNBC. "But that's what makes them such an exciting company to watch. You've got a huge company with a stellar brand that's essentially risking it all to shoot for the stars."

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