Tesla Gigafactory has begun producing battery cells for the Model 3, company management said over the weekend. It’s a crucial step toward producing its first mass market vehicle at a lower price point than what its other vehicles sell for.

Tesla Gigafactory

Tesla Gigafactory is running on schedule

Tesla had been aiming to have its Gigafactory churning out battery cells for the Model 3 sometime during the second quarter. The facility began building nickel manganese cobalt oxide cells for the Powerwall and other energy storage products in January.

Tesla co-founder and CTO JB Straubel confirmed during Saturday’s keynote presentation at the Annual Energy Fair held in Wisconsin by the Midwest Renewable Energy Association that production on them is beginning “right now” at Gigafactory 1. He added that they were preparing to ramp production on the battery cells as needed to support the car’s production.

Tesla’s Gigafactory was built largely to address concerns about the high cost of batteries for electric vehicles. Analysts have been debating whether the batteries can be made cheap enough to turn a profit on the $35,000 Model 3, and Tesla management assures investors that they can.

Tesla designs new battery packs

According to Electrek, Tesla has been using nickel cobalt aluminum oxide battery cells for its vehicles, but the Model 3 will have a new kind of module and a new architecture for its battery packs. The automaker hasn’t said whether the car’s battery packs will still use a nickel cobalt aluminum oxide chemistry or whether it will be different than the chemistry used in the packs for its other cars.

While not revealing any real details about the new batteries, CEO Elon Musk has been boasting about them being the “highest energy density cell in the world and also the cheapest.” The current plan is to use the new battery packs only in the Model 3 to meet the extreme demand, but as production at Tesla’s Gigafactory ramps up, the company plans to move the Model X and Model S to the new packs as well.

Tesla stock slipped by as much as 0.25% to $370.46 during regular trading hours on Monday.