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Frontline: Tesla’s New Battery Plant to Bring Electric Vehicles to the Masses

A comprehensive incentives package (pending legislative approval), proximity to natural resources and abundant renewable energy potential are significant factors that will improve Tesla’s odds of success in the “get things done state.”

Q3 2014
On September 4th, Tesla Motors officially selected a site outside of Reno, Nevada, as the location for its new $5 billion lithium-ion battery “Gigafactory.” After also considering California — where its auto assembly plant is located — as well as Texas, Arizona, and New Mexico, Nevada was chosen for a number of reasons, among them its promise to deliver a sizable incentives package.

Nevada has called a special session of its legislature to approve an incentives package valued at more than $1 billion over 20 years. According to information released by the governor’s office, the package includes a 100 percent abatement of modified business taxes as well as real and personal property taxes until June 30, 2024. Sales tax would be abated until 2034. Tesla would also receive a transferable tax credit of $12,500 per permanent full-time job, up to 6,000 jobs, as well as transferable tax credits of 5 percent for the first $1 billion and 2.8 percent for the next $2.5 billion investment. In return, Tesla is donating $1 million to fund advanced battery research at the University of Nevada, Las Vegas, and will also contribute $37.5 million to Nevada’s K-12 educational system beginning in 2018.

At a news conference where the factory announcement was made public, Tesla CEO Elon Musk said it wasn’t just about the incentives. Tesla needed a location where there was high confidence the factory would be ready on time so that it could produce and mass-market its affordable electric vehicles. He called Nevada the “get things done state.”

Panasonic Corporation is collaborating on construction of the Gigafactory, according to Jim Reilly, the firm’s vice president of Corporate Communications. Reilly says Panasonic will invest in equipment for producing the lithium-ion battery cells and will manufacture the cells at the new Nevada facility, while Tesla supplies the land, buildings, and utilities.

When asked to comment on Tesla’s decision, Gregory Burkart, practice leader for Site Selection & Business Incentive Advisory Services at Duff & Phelps, LLC told Area Development, “Based on our previous work for lithium-ion battery manufacturers, it appears that Reno/Sparks is a home run for the company, state, and local community. Two of the largest operating costs, logistics and electric rates, will be lower in Nevada than competing locations. Tesla will significantly improve their odds of success with this decision.”

According to Cheree Boteler in NV Energy’s Economic Development department, Tesla has stated that renewable energy is a priority for the company, and it’s been important to NV Energy and the state for many years. Nevada requires that 25 percent of electricity delivered must be generated from renewable energy by 2025, and the utility is well on its way to achieving or exceeding that requirement. Nevada has an abundance of renewable energy resources, and renewable energy has been part of the mix since 1985. Additionally, NV Energy has a provision in its tariffs that allows all of its customers to request that either 50 or 100 percent of their electricity be produced from renewable energy.

When it comes to the logistics advantages of Tesla’s location decision, Tim Feemster, managing principal of Foremost Quality Logistics, agrees with Duff & Phelp’s Burkart. “Being close to the raw material for the manufacturing is very important to supply chain costs as there is always a multiplier in processing. [The decision] translates into lower cost for the product.” He added, “It seemed obvious to me last month that Reno would be the winner when an army of earth movers started preparing the site, long before this announcement. Next question is where is the money going to come from and how much will it cost to borrow.”
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