Electric car maker Tesla started producing lithium-ion battery cells yesterday at the company’s gigafactory outside Reno, Nev., alongside its longtime battery partner Panasonic.

Tesla and Panasonic’s new jointly designed cylindrical 2170 cells will first be used to power Tesla’s Powerwall 2 home energy supply unit, and the Powerpack 2 commercial solar energy storage product.

Cells destined for the $35,000 Model 3 electric car will begin in the second quarter, which Tesla CEO Elon Musk has said will be delivered by the end of this year.

At its current stage, the diamond-shaped factory is less than 30 percent complete, yet still manages to occupy 1.9 million square feet, Tesla said in a press release, with interior operational space of 4.9 million square feet total because of how it’s using different floors.

SEE ALSO: Tesla Scrambles To Finish ‘Gigafactory’ to Meet Model 3 Launch Date

The name gigafactory comes from the plant’s planned annual battery production capacity of 35 gigawatt-hours, which Tesla has said it would achieve by 2018.

“Giga” is a unit of measurement that represents “billions”.

Tesla has stated that it plans to sell half a million cars by next year, and much is riding on the Model 3, which sells for roughly half the price of the base Model S luxury electric sedan.

It needs cheaper, more plentiful batteries to be able to reach that goal.

The gigafactory looks to not only satisfy Tesla’s growing demand in terms of volume, but also drop the individual cost of batteries through use of automated production capacity and improved processes.

SEE ALSO: Eight Impressive Statistics About Tesla’s Gigafactory

The battery production news came a day after Tesla revealed that it missed its vehicle sales goals in the fourth quarter of 2016, delivering 2,750 fewer vehicles than forecast.

Still, total sales in 2016 were up 64 percent versus 2015, thanks in part to the addition of the electric Model X crossover.

High volume, low cost batteries are a step in the right direction for Tesla to make good on its promise to begin deliveries of the Model 3 by the end of the year.

The question is, can the California car manufacturing plant come through on time?