NEWS: Tesla’s Gigafactory Finds a Home in Nevada

Posted by Lexie Briggs on Sep 5, 2014 3:40:00 PM

gigafactoryIn a press conference Thursday afternoon, Nevada Governor Brian Sandoval and Tesla Motors CEO Elon Musk announced that the company’s groundbreaking battery manufacturing facility (called a “Gigafactory”) will be located in Nevada. Shortly after Tesla announced plans to build the Gigafactory in February, several states in the southwest scrambled to compete for the final location. Arizona, Texas, California, and New Mexico gambled for Tesla’s favor, but the house always wins in Nevada.


The $5 billion Gigafactory will produce advanced batteries for electric vehicles, allowing Tesla’s production to become much cheaper and more vertically integrated. The factory also plans to supply solar manufacturers and utilities with stationary battery packs. The factory is expected to bring 6,500 and one hundred billion dollars in economic impact over the next 20 years, according to Governor Sandoval.


“These 21st century pioneers, fueled with innovation and desire, are emboldened by the promise of Nevada to change the world. Nevada is ready to lead,” Governor Sandoval said in his address.


Mark Rogowsky, wrote in Forbes that Nevada was “always the best bet” and that Tesla was “almost certainly destined to end up selecting Nevada anyway,” arguing that the Nevada site offers a unique convenience. The new site is a relatively short five-hour drive from Tesla’s factory in Fremont, CA, plus the site sits near convenient rail connection. Nevada also boasts the only active lithium mine in the U.S., which will come in handy as the company doubles the number of lithium-ion batteries produced globally. According to Alex Walsh, president of the Lithium Exploration Group, the Gigafactory alone is expected to raise global demand for lithium carbonate by 15,000 tons per year.


Proving it was more than just a convenient location, Nevada also demonstrated the political will to land the factory. As part of the deal to land the factory, the state would have to commit to contributing 10 percent of the factory’s cost, or $500 million. Nevada went above and beyond, with package of tax breaks and incentives worth at least $1.25 billion over the next twenty years. The Reno Gazette-Journal published a breakdown of the provisions late Thursday: a 20-year sales tax abatement and 10-year property tax abatement make up the bulk of the package. In exchange, the company must commit to investing minimum of $3.5 billion in real property in the state, which, remembering that the projected cost for the factory is $5 billion is a fairly low bar.


Meanwhile, policies in Texas and Arizona still do not allow Tesla’s vehicles to be sold directly to customers, and New Mexico and California struggled to pass a tax incentives program through the legislatures. Concerned New Mexico legislators penned a letter in April that argued against major tax incentives for Tesla, saying “we cannot afford to give up so much future tax revenue to [while] we continue to impoverish our schools and our infrastructure.” Last week the LA Times reported that California’s efforts to attract the facility had “run out of juice,” with the legislature leaving Sacramento without holding debate on the state’s incentive package, which included relaxed environmental regulations and substantial tax breaks. (For what it’s worth, Nevada’s deal has met with its own share of pushback, with critics on both the right and the left.)


Ultimately, though, this is merely the beginning for Tesla. Simon Sproule, a spokesperson for Tesla, said the company would continue evaluating sites beyond the Reno location. Partially for insurance (in case the Reno site has “unforeseen problems”) and partially because the company expects the Gigafactory will be the first of many. "Gigafactory No. 1 is not the end of it," Sproule said. "If you expect the company to grow - which we do - ultimately, you'll need more than one Gigafactory."


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Topics: News Update