Tesla Gambles on Nevada for its $5B 'Gigafactory'

Sep 05, 2014 05:30 PM EDT | Matt Mercuro

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Tesla Motors picked Nevada as the site for its $5 billion battery factory that will be vital to its next generation of electric vehicles.

The California-based electric car company is still working on the details for the plant that will make more efficient and cheaper battery packs for Tesla's future vehicles, like the $35,000 Model 3 due in 2017.

"Nevada offers an attractive tax structures and financial incentives, combined with the high quality of life and abundance of natural resources in Northern Nevada which are much needed for the efficient operation of the plant," said Manos Maragakis, Dean of the College of Engineering University of Nevada, Reno, in a statement to AutoWorldNews.

Dean of the College of Business of the University of Nevada, Reno, Greg Mosier, J.D. seemed to agree with his colleague about the decision to build the plant in Nevada.

"Business fundamentals drive most of these decisions. Key factors that support Nevada as a logical choice include workforce, proximity to the manufacturing facility in Northern California and proximity to the raw materials," said Mosier in a statement to AutoWorldNews. "All the states seeking the facility leveraged their assets with incentives that I would speculate ended up being more or less the same."

California, Texas, Arizona, and New Mexico were also considered for the plant.

Panasonic Corp. will produce lithium ion cells for battery packs and will fund a portion of the cost of the plant, which could allow the company to take on more established automakers.

The state of Nevada will give Telsa more than $1 billion in tax breaks and abatements over the next 20 years.

Tesla Chief Executive Officer and co-founder Elon Musk said Nevada's offer to Tesla "was not the biggest incentive package" but said that the state was picked because it "can do things quickly" and "get things done."

Nevada's package is subject to approval by the state's legislature, according to Nevada Gov. Brian Sandoval during a press conference that was streamed live online.

Sandoval said the plant will create more than 22,000 new jobs and put $100 billion into the state's economy over the next 20 years.

"Telsa is a great example of a company driving innovation in an industry where there has been a reliance on the status quo," said Mosier. "It's an example of the disruptive innovation as described by Clayton Christensen."

The planned site for the factory is 15 miles east of Reno, Nevada, in an industrial park in Storey County, home to 4,000 people.

"I expect that the factory will have a very positive influence on people regarding the use of electric vehicles and I expect that this market will see significant growth in the near future," said Maragakis. "I also believe sure that more charging stations around the country will further facilitate the growth of the use of electric vehicles."

Musk told investors in July that 40 to 50 percent of the cost of lithium-ion battery plant would be covered by Tesla, with Panasonic covering 30 to 40 percent, and the state where it's located 10 percent, according to Reuters.

"Other industrial partners" will provide between 10 percent and 20 percent of the cost of the "Tesla Gigafactory," Musk added.

Tesla hopes to make 60,000 vehicles next year, after speaking heavily this year to update and expand its Fremont, California assembly plant.

The Fremont plant manufactures the $70,000-plus Model S sedan, and will build the Model X next spring.

The plant is now capable of making 1,000 cars a week, a number that will double by the end of 2015, according to Musk.

The mass-market Model 3 is expected to be ready by 2017.

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