Loaded With Subsidies, Calif. Likely to Woo Tesla Battery Factory

Monday, 28 Apr 2014 05:38 PM

By Rob Nikolewski, Watchdog.org

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New Mexico is one of four states in the race to win a contract from Tesla Motors to build what Tesla has dubbed its "gigafactory," which would make batteries for the company's expensive and sporty electric cars. The project promises to bring 6,500 jobs.

But there are rumblings that Tesla may also be looking at California, which has already lavished Tesla with environmental and economic subsidies, as well as Texas, Arizona, and Nevada.

A couple of developments indicate the Golden State may be a contender for the $5 billion factory, which will make lithium-ion batteries.

First, Tesla corporate officials have quietly gobbled up a couple of parcels of land in California.

As reported by SFGate.com, Tesla has leased a 430,000-square-foot facility in Lathrop, a small city due east of the Bay Area in California's Central Valley. The building used to be a former distribution center for DaimlerChrysler. Tesla is based in Fremont, Calif., which is about an hour away from Lathrop.

A Tesla spokeswoman said last week that the company has signed leases for more than 625,000 square feet of California real estate in the last two months, but she wouldn't say exactly what Tesla planned to do with them.

The second development is that California Gov. Jerry Brown and U.S. Sen. Dianne Feinstein have been appealing to Tesla's founder and billionaire, Elon Musk, to consider California for the gigafactory — and a Tesla executive confirmed it.

"Yes, California has shown interest. And, yes, conversations are going on with the state," Simon Sproule, vice president for Tesla communications and marketing, told Sacramento Bee columnist Dan Moraine last week.

Building the gigafactory in California would seem to make geographical sense for Tesla. It may also make a lot of economic sense, too, considering how much money in subsidies Musk has received from the Golden State.

Consider, as Morain points out, that the California Energy Commission spent $10 million to upgrade Tesla's factory in Fremont, the state paid $650,000 to train workers for Tesla, and the California financing authority has given Tesla sales tax breaks on manufacturing equipment worth up to $90 million.

Tesla has also received lucrative inducements from California through green energy initiatives, which prompted this barbed response from Wall Street Journal columnist Allysia Finley:

"We suspect Mr. Musk will ultimately decide to build the gigafactory in California and is merely stringing other states along while it negotiates the price tag in Sacramento. Liberals often complain about billionaires trying to buy state elections. Mr. Musk, on the other hand, doesn't need to spend a cent, since politicians give him so much for free."

Given the favors Tesla has received, one California politician said Musk has an obligation to build the gigafactory in the Golden State.

"The policies of this state helped build Elon Musk's company," Assemblyman Henry T. Perea, a Fresno Democrat, told Morain. "It is outrageous that he is looking anywhere other than California to build his factory."

Perea carried a bill that was signed into law in 2013 extending alternative energy subsidies. Tesla lobbied for the bill.

In New Mexico, Economic Development Secretary Jon Barela told New Mexico Watchdog that getting the Tesla deal would be "a transformational opportunity for this state," but wouldn't go into specifics of what kind of package the state is putting together, saying discussions are confidential.

New Mexico Land Commissioner Ray Powell said he's offered to set aside thousands of acres of state land as a way to lure Tesla, and Gov. Susana Martinez is considering calling a special session of the Legislature to discuss economic incentives.

Meanwhile, one car expert told Bloomberg News that Nevada has the inside track to get the Tesla contract because, among other reasons, there's a railroad line that connects northern Nevada to Tesla's assembly plant in northern California.

Another possible factor? Nevada — along with Arizona and Texas — is a right-to-work state. New Mexico and California are not.

Tesla officials haven't given a specific date for when the company will announce a decision, but the company's projected timeline for "zoning, design and build" of the plant is slated for later this year.

The factory is scheduled to open in 2017, and the company plans for it to be fully operational by 2020. It is expected to produce up to a half-million cars a year, according to the Tesla online presentation.


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