Los Angeles - Tesla Motors’s plan to build what co-founder Elon Musk bills as the largest battery factory could not only shake up the power industry, but trigger a bidding war between US states eager for the 6 500 jobs the $5 billion (R54bn) investment could create.

The maker of luxury electric cars announced on Wednesday that it was selling at least $1.6bn of convertible notes to finance the project and exploring locations in Texas, Nevada, Arizona and New Mexico for a 1 million square metre facility. Tesla declined to comment on whether negotiations had begun.

“This would rank as the most attractive industrial project out there,” said Dennis Cuneo, the president of DC Strategic Advisors and a former Toyota executive who helped the Japanese car maker select US manufacturing sites.

Tesla has dubbed the project the “gigafactory”, and it would make Musk a force in US manufacturing and electric power. The plant he envisions would have more capacity than any other to make lithium-ion batteries.

“This has a huge impact beyond Tesla,” Harley Shaiken, a labour economist at the University of California, said. “It gives enormous legitimacy to battery production and the future of the electric car because that lies in the battery. It’s high stakes, high technology.”

Tesla said it planned an investment of $4bn to $5bn by 2020 and would fund about $2bn of the total. It said the convertible bond offering could grow to $1.84bn.

Musk said the plant was key to Tesla becoming a mass-market vehicle maker capable of producing 500 000 or more electric vehicles a year. The company’s cheapest model, the Model S, starts at $71 000.

The 42-year-old billionaire could also get closer to achieving his goal of being a player in the power-storage industry in the US, as utility customers continue to turn to batteries and solar panels to reduce electricity bills.

The scale of production at the planned factory would be so immense that Tesla estimates it would drive down lithium-ion battery costs by at least 30 percent.

That possibility for batteries capable of storing large amounts of electricity from wind, solar and other renewable sources was what made the project appealing, said James Albertine, an equity analyst with Stifel Nicolaus, who rates Tesla a hold. Tesla rose 2 percent on Wednesday in New York to end at a record $253.

“On the vehicle side, I am pretty steadfast in my scepticism at $200 or above. I’m a bear,” Albertine said. “My bull case is in the case that the cars become ancillary.”

Tesla, he said, would essentially become a power storage company. That would benefit SolarCity, which is partly owned by Musk and may be a partner in the factory.

Musk said last week that Panasonic – now the biggest supplier of lithium-ion cells used in Tesla’s batteries – might get involved. Panasonic’s participation was “not 100 percent confirmed”, he said.

While Tesla identified four states as potential hosts, Cuneo said many others would be interested. – Bloomberg