Electric vehicle maker Tesla has begun constructing a 50 GWh in-house lithium refinery in the greater Corpus Christi region of Texas, representing an investment of over $1 billion.

CEO Elon Musk said the refinery will produce enough battery-grade lithium for 1 million electric vehicles by 2025, making Tesla the largest lithium processor in North America.

The facility is a crucial step toward vertical integration and establishing a domestic supply chain for EVs in the U.S.

The Inflation Reduction Act (IRA), a U.S. legislation that promotes clean energy and domestic manufacturing, among other mandates, provides a $7,500 incentive to consumers to purchase EVs. To qualify for a $7,500 credit, vehicles must meet sourcing requirements for battery components (starts at 50% in 2023 and moves up to 100% by 2029), as well as critical minerals (requirement starts at 40% in 2023 and increases to 80% by 2027).

During the recent quarterly earnings call, Musk expressed that Tesla aims to become the vertically integrated manufacturer of batteries to help cut costs down on the most expensive part of battery manufacturing – refining.

The new lithium refinery will be situated on a vast site of over 1,200 acres and will be the first industrial-scale deployment of an acid-free lithium refining process.

The process is designed to eliminate the use of harmful reagents and by-products and instead use more inert alternatives, making it an environmentally friendly option.

Furthermore, the by-product of this process, a combination of sand and limestone, has practical applications in producing construction materials.

In addition to processing lithium hydroxide, Tesla anticipates that the facility will also handle other intermediate lithium feedstocks in the future, such as recycled batteries and manufacturing scrap.

Last month, the company said it would build a new gigafactory in Shanghai, exclusively focused on producing its energy storage product Megapack. The company announced the move publicly on Twitter.

The company’s fourth-quarter profit was up 19% year-over-year, with solar and storage business revenues reported at $1.31 billion.