Loaded with subsidies, California may join race for Tesla battery factory


THE TESLA SWEEPSTAKES: There are indications that the Tesla electric car company be considering California — in addition to New Mexico and three other states — as the site of a battery factory that promises to create 6,500 jobs.

By Rob Nikolewski │ New Mexico Watchdog

SANTA FE, N.M. — New Mexico is one of four states in the race to win a contract from Tesla Motors to build a “giga-factory” that 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 a potential site, joining New Mexico, Texas, Arizona and Nevada in the competition.

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

First, Tesla corporate officials have been quietly gobbling 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 Tuesday 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 plans to do with them.

Second, 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 giga-factory — 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’s communications and marketing, told columnist Dan Moraine of the Sacramento Bee last week.

Building the giga-factory 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: 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 giga-factory 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 giga-factory in the Golden State.

“The policies of this state helped build Elon Musk’s company,” Assemblyman Henry T. Perea, D-Fresno, told Morain. “It is outrageous that he is looking anywhere other than California to build his factory.”

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

In New Mexico, Economic Development Department 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 — are right-to-work states. New Mexico and California are not.

Tesla officials haven’t given a specific date as to 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 launch in 2017 and plans to be fully operational by 2020, expecting to produce up to a half-million cars a year.

Contact Rob Nikolewski at rnikolewski@watchdog.org and follow him on Twitter @robnikolewski