How Nevada Won Tesla's Battery-Operated Heart

Tesla announces a factory location in Nevada.

September 4, 2014, 8:46 PM
PHOTO: Elon Musk, co-founder and CEO of Tesla Motors, poses with a Tesla during a visit to Amsterdam on January 31, 2014.
Elon Musk, co-founder and CEO of Tesla Motors, poses with a Tesla during a visit to Amsterdam on January 31, 2014.
Jerry Lampen/AFP/Getty Images

— -- Location, location, location. That, plus an important raw material and one of the largest tax breaks for an auto company ever reportedly have combined to lure a $5 billion Tesla factory to the Silver State.

Nevada beat California, Arizona, New Mexico and Texas in round one of the fight to win the battery-operated heart of the electric car maker -- though Tesla still may open other facilities in other states in the future.

Nevada Gov. Brian Sandoval said the "gigafactory" will be built if legislators approve tax breaks and other incentives worth up to $1.3 billion over 20 years, according to the Associated Press.

In a statement released by Tesla, Sandoval said the gigafactory will create $100 billion in economic impact for his state over 20 years.

"Even the most skeptical economist would conclude that this is a strong return (on investment) for us," Sandoval said.

Sandoval and Tesla founder Elon Musk held a news conference about the deal earlier today, where the governor called it a "monumental announcement that will change Nevada forever."

"The Gigafactory is an important step in advancing the cause of sustainable transportation and will enable the mass production of compelling electric vehicles for decades to come," Musk said in a statement.

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Musk indicated earlier this summer how competitive -- and mega-expensive -- the race has been. During Tesla's earnings call in July, he indicated he was expecting the winning state to provide upwards of 10 percent, or $500 million, of the upfront costs of the $5 billion factory. Panasonic, Tesla's partner for the factory, could put up to 30 to 40 percent of the cost, Musk said, while other suppliers could chip in 10 percent.

Musk teased that Reno, Nevada, had already beaten the other states to the punch, saying Tesla had already broken ground on a potential location in Reno.

Reno is about four hours away from Tesla's headquarters in Palo Alto, California, and its assembly plant in nearby Fremont, California. Plus, the location in Nevada would provide important access to raw lithium materials, central to the batteries, the Wall Street Journal noted.

Officials from California started engaging Tesla in 2012 about its gigafactory, plus other in-state manufacturing plants in Lathrop and Newark, California.

In February, however, Tesla announced that it was considering Arizona, New Mexico, Nevada and Texas for the gigafactory. The omission of California prompted the Golden State to step up its game, with even Sen. Diane Feinstein, D-California, rallying the state to pursue the gigafactory.

States suddenly sped up their legislative bureaucracy to get a slice of the e-pie. In June, California Senate President pro Tem Darrell Steinberg introduced legislation with the support of the Gov. Jerry Brown to provide regulatory streamlining and potential incentives to encourage Tesla to build the factory in California. But it wasn't enough.

Alexis Georgeson, a spokeswoman for Tesla, said Wednesday in a statement, "We continue to work with the state of Nevada and look forward to joining Gov. Sandoval and legislative leaders ... in Carson City."

Tesla said that "discussions with the other states in the process are ongoing," and that the company has "always said we anticipated breaking ground at more than one site for the gigafactory."

Other states, such as California, said they are still in the fight.

“No other state has added more jobs than California since the recovery began and we’ll continue to work closely with businesses, including California-based Tesla, that want to grow here," Brook Taylor, spokesman for the California Gov. Brown's Office of Business and Economic Development, said in a statement.

The Associated Press contributed to this article.

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