Tesla ‘Gigafactory’ Will ‘Change Nevada Forever,’ Gov. Sandoval Says

Tesla ‘Gigafactory’ Will ‘Change Nevada Forever,’ Gov. Sandoval Says

By Charles Fleming, Los Angeles Times

Tesla Motors’ electric car battery plant will be worth $100 billion to the state of Nevada, according to the men who crafted the deal.

Nevada Gov. Brian Sandoval and Tesla Chairman and Chief Executive Elon Musk said Thursday that the Palo Alto-based company’s lithium-ion battery plant will prove a boon for both sides, including billions in investment from Tesla and billions in tax breaks from Nevada.

The proposed $5-billion “gigafactory,” where Tesla will produce batteries in partnership with Japanese electronics giant Panasonic, will be constructed on property known as the Tahoe Reno Industrial Center near Sparks, in northern Nevada.

Tesla purchased the land and broke ground there in June, halting construction before actually pouring concrete while negotiations with the state continued, said a source with knowledge of the talks who was not authorized to speak publicly.

Trumpeting the news at a press conference in Carson City, Sandoval said the deal would “change Nevada forever … and stream billions of dollars into our economy.”

Hearkening back to the state’s pioneer beginnings, and calling Tesla’s Musk “a rare visionary who has the courage to reach beyond and to convert the unthinkable into reality,” Sandoval said: “We are determined to be a major part of moving our country and our global economy forward. Ladies and gentlemen, we are ready to lead.”

Under the terms of the proposed deal, according to Nevada documents, Tesla would receive up to a 100 percent tax abatement for the next 20 years for all sales tax, and up to a 100 percent tax abatement for the next 10 years for all real property tax, personal property tax, and modified business tax.

Tesla would also receive a transferable tax credit of 5 percent of the first $1 billion it invests in the state, and of 2.8% for the next $2.5 billion.

The governor’s office said the deal would include a $5-billion investment over the next three to five years, and a subsequent investment of an additional $5 billion over the following five years.

In addition to 6,500 factory jobs, at $25 an hour for each position, the Tesla deal would create 16,000 other jobs — including 3,000 construction jobs — while increasing state employment by 2 percent and regional employment by 10 percent.

The state said Tesla would also make a direct $37.5-million contribution to Nevada K-12 education, beginning in August 2018, and provide the University of Nevada Las Vegas with $1 million for advance battery research.

The state concluded that the Tesla deal would have a $1.9-billion “total fiscal impact” over 20 years, including an infusion of $430 million in state revenue, $950 million in local revenue, and $500 million in K-12 education revenue.

The deal represents a win for the state, one analyst said, but at a cost.

“This is taxpayer money, and it’s quite a bit of money,” said Thilo Koslowski, automotive practice leader at the technology research company Gartner. “California lost, and Nevada won, but at the point of a huge incentive.”

The first batteries would roll off the line in about three years — when Tesla plans to launch its new Model 3, the “mass market” sedan. The company has said the Model 3 will sell for $40,000, or about half the cost of its current Model S sedan.

“We have reached an agreement with the Tesla motor company, subject to legislative review and approval, that will enable Tesla to build the world’s largest and most advanced battery factory, right here in the Silver State,” Sandoval said.

Nevada beat out California, Texas, New Mexico, and Arizona for the Tesla factory. California Gov. Jerry Brown and Sacramento legislators had lobbied fiercely to keep the electric car components in the state, where Tesla already builds and assembles its popular but expensive electric cars.

“I’m devastated for the 6,500 families who won’t have the chance at these jobs unless they move to Nevada,” said state Sen. Ted Gaines, a Republican representing the Sacramento suburb of Rocklin. “Tesla is a California-born company that the state has invested heavily in, and we want it to succeed. It makes complete sense for it to expand right here, close to its headquarters, yet they are headed out of state.”

Gaines called the move to Nevada “a clear indictment of our business climate” and said Tesla’s decision was a strong signal to legislators “about how hard they have made it to operate here.”

Tesla representatives had stressed, as they weighed their options over the last several months, that a speedy start on the factory was essential to the company’s plans.

Although Tesla’s domestic sales for 2014 have been flat, the company has recently begun selling its Model S cars in England and China. The company has also begun production of a crossover SUV, the Model X, and is hoping to fast-track production of the Model 3.

All those vehicles, and the ability to sell them at a lower price, depend upon a steady supply of mass-produced batteries, which Tesla has said it cannot manufacture in sufficient number at its production facilities in California.

Tesla stock closed up $4.85 at $286.04 on Thursday, its highest closing price since its initial public offering in 2010. The shares traded as high as $290.50 in the late afternoon.

AFP Photo/Justin Sullivan

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