As it stands right now, lithium-ion batteries are the most cost-effective solution to further Tesla’s electric car master plan. On the heels of its July Model 3 launch, Tesla has opened its $5 Billion Gigafactory. With battery cell production set to start in 2017 and Model 3 orders estimated at 500,000 units per year, Tesla is hoping to surpass its 10% electric car global market share in 2015.

The key ingredient in Tesla’s worldwide electric car dominance: lithium-ion battery innovation. According to a recent TechCrunch article, Gigafactory “offers unprecedented economies of scale for lithium-ion battery production, lowering the price from $190 per kWh in April 2016 to an estimated $130 per kWh once complete.” This translates into a 30% reduction in battery production costs.

According to TechCrunch, electric vehicles accounted for 0.89% or 540,000 of the 72.37 million cars sold in 2015. With the Nissan Leaf leading the electric vehicle sales worldwide (100,000 sold between August 2015 – September 2016), Tesla hopes to control the one thing that can differentiate itself from the EV competition: energy storage. Tesla’s Model 3, with a range of approximately 270 miles (430 km), has already broken the limited range barrier that has always haunted Battery Electric Vehicles (BEV’s). By turning their attention toward building an elaborate Supercharger network, Tesla is solving another problem: lack of available charging stations. Finally, Tesla’s Model 3 sedan, offered at the reasonable starting price of $35K, is competitively priced in an expensive BEV market.

To better understand the scale of Tesla’s operations, Gigafactory will have the largest footprint of any building of its kind and according to CEO Elon Musk, “Volumentrically, it will only be second to the Boeing factory in Washington.” So what does this mean for the electric vehicle industry? For one, it certainly tells EV manufacturers that Tesla has full confidence in lithium-ion batteries as their primary energy source. With 14% already built and a battery production start date set for 2017, Tesla’s Gigafactory is projected to make more lithium-ion batteries than all of the world’s factories combined.

With Tesla locations projected to spike from 215 in North America, Europe, and Asia-Pacific to 441 at the end of 2017, it’s safe to say that Tesla plans to stick with improving BEV technology instead of transitioning to Fuel-Cell Electric Vehicles (FCEV’s). By converting hydrogen gas to electricity, which produces only water and heat, FCEV’s are classified as zero-emission vehicles. According to TechCrunch, “FCEV’s rival modern gas engines in range and fueling is just as easy.” Toyota and Honda seem to love the upside of Fuel-Cell Electric Vehicles and have introduced both the Honda Clarity and Toyota Mira to market.

Shouldn’t Tesla, like Honda and Toyota, start building FCEV’s instead of relying on lithium-ion battery technology? According to Tesla’s own admission, “the battery pack starts deteriorating at 4-5 years of use, and by the 8th year, the capacity decreases by 30 percent.” With a minimum battery price tag of $12K, it’s a rather expensive and critical part to replace after only five years of owning your $35K Tesla Model 3. The Gigafactory hopes to tap into what Tesla says is another 30% increase in energy in weight for lithium-ion batteries. By boosting battery capacity, Tesla would be able to prolong the time between car purchase and replacement battery installation.

So what is the future of electric vehicles energy storage? With hydrogen being a plentiful element and its consumption free from carbon emissions, Fuel-Cell technology seems to be the logical choice. It’s the only energy source not reliant on battery technology; but according to Elon Musk, ultracapacitors, not hydrogen, will be the breakthrough for electric vehicles. “Ultracapacitors charge and discharge in seconds, have a lifetime of up to 500 times that of lithium-ion batteries, and are highly reliable.” With the high costs and the lack of fueling infrastructure, FCEV’s are taking a back seat to the ideal electric car combo plate of ultracapacitors and batteries.

As one would expect, advances in battery technology translate into opportunities for EV manufacturers. Tesla’s new Gigafactory, designed specifically for lithium-ion battery production, may just double as a research and development facility as the EV industry looks for a more reliable energy source. The world awaits as Tesla builds its Gigafactory and will inevitably introduce yet another breakthrough in EV technology.