Tesla Model 3 production isn't expected to start until the end of 2017 at the earliest, but the company appears to be making preparations for high volumes already.

Like the Model S and Model X before it, Tesla Motors will build the $35,000 Model 3 at its Fremont assembly plant in California.

Which would explain why Tesla is leasing large amounts of commercial real estate near its factory.

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Tesla recently leased two warehouses totaling just over 1 million square feet, according to a report yesterday in the San Francisco Business Times.

The two buildings are at the Oaks Logistics Center in Livermore, about 20 miles from Fremont.

In addition to these warehouses, Tesla could add a third, 294,000-square-foot building at the site, anonymous sources familiar with the matter told the paper.

Tesla Model 3

Tesla Model 3

Tesla is reportedly paying 57 cents per square foot per month on the two buildings it's already leased, which measure 635,533 square feet and 367,734 square feet.

They will likely be used as warehouses rather than converted for manufacturing, the report said, since Tesla has several large, empty buildings remaining at the Fremont site.

Car manufacturing seems likely to remain exclusively at Fremont, at least until the company opens its long-promised factory in China.

ALSO SEE: Tesla plant-capacity increases point to Model 3 preparations

When it was operated as a joint venture of General Motors and Toyota, the Fremont plant was capable of producing 500,000 cars per year.

Tesla produces significantly fewer than that now, but hopes to ramp up to that level by 2020.

It plans to deliver between 80,000 and 90,000 Model S sedans and Model X crossovers, and says it already has around 400,000 reservations for the Model 3.

Tesla Model 3

Tesla Model 3

Tesla previously used some of factory space for parts storage, but its plans to add Model 3 production and increase Model S and Model X volume are forcing it to seek additional facilities.

Last year, it leased the 500,000-square-foot former Solyndra solar-panel factory in Fremont, as well as a new 300,000-square-foot building in that city.

MORE: Latest drone footage of Tesla Gigafactory shows progress

While vehicle assembly will take place in California, Model 3 battery packs will come from the massive "Gigafactory" under construction just outside Reno, Nevada.

Tesla needs the Gigafactory to produce battery cells on a large enough scale to achieve a 215-mile range for the Model 3 at the oft-quoted $35,000 price point.


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