On Thursday, Tesla Motors made a long-awaited announcement, revealing that the Tahoe-Reno Industrial Center had been chosen to host the Gigafactory. That factory is critical to Tesla’s success, because it will produce battery packs in the quantity required for Tesla to sell the Model 3. That car will be Tesla’s 3rd generation, affordable mass market electric vehicle, with an MSRP of $35,000 and an electric range of over 200 miles. Tesla intends to sell 100-200,000 Model 3’s per year, requiring more battery pack capacity than current factories produce. In the euphoria of Tesla’s announcement it’s important to not lose sight of the cost to Nevada, and to ask whether the deal is good for that state. DiversifyNevada has posted a document giving a fairly detailed outline of the deal, the projected gains Nevada will see, as well as Nevada’s cost in terms of tax credits and abatements.
The 5 million square foot building will be one of the largest in the world. The $5 billion cost is broken down as $1 billion for the building, and $4 billion for equipment. Over the next 10 years they plan to spend an additional $5 billion on replacement equipment. The facility is expected to cause $100 Billion of economic activity in Nevada over the next 20 years. It’s expected to employ 6,500 workers, and cause the employment of another 16,000 workers, for a total of 22,000 new jobs.
Tesla Motors will K-12 Education in Nevada with a $37.5 million grant in August 2018. The company will also fund advanced battery research at UNLV, and commit to hiring Nevadan’s and Veterans.
The new jobs represents a 2% increase in Nevada’s employment, and 10% in regional employment. The economic activity represents 3-4% of Nevada’s GDP, and 20% of the regional GDP.
That’s a pretty hefty positive impact on Nevada’s economic situation. If, that is, Tesla Motors does what they promise. But what about the cost?
The document estimates the tax abatements and credits will cost between $675 million and $1.1 billion, depending on various factors.
Tax Abatements include:
- Up to 100% abatement of Sales Tax until June 30, 2034
- Up to 100% abatement of Real Property Tax until June 30, 2024
- Up to 100% abatement of Personal Property Tax until June 30, 2024
- Up to 100% abatement of Modified Business Tax until June 30, 2024
Tax credits include:
- Transferable Tax Credit of $12,500 per permanent, full-time job, up to 6,000 jobs – average wage of jobs must be $22 per hour to qualify
- Transferable Tax Credit of 5% of first $1 billion investment
- Transferable Tax Credit of 2.8% of next $2.5 billion investment
Additionally, Nevada is to pass a law clarifying the ability of electric car companies to sell cars directly to the public. Tesla Motors has run into trouble across the country because of its direct-sales-to-the-public business model. This model goes against state laws across the country requiring that cars be sold through independent dealerships. In some states it means Tesla cannot sell cars at all, and that customers have to purchase their cars in another state.
The new Nevada law will, if passed by the Legislature, say that “manufacturers that exclusively produce electric passenger vehicles and have not engaged in a franchise with a dealer in the State may engage in retail sales of those vehicles.” Tesla Motors is the only such company.