The High Stakes Race By Southwest States For Tesla's $5 Billion Gigafactory

Feb 27 2014, 1:12pm CST | by

The High Stakes Race By Southwest States For Tesla's $5 Billion Gigafactory
Photo Credit: Forbes Auto

Any major manufacturer that opens a big factory can expect states to fall over themselves offering incentives. Just look at what happened when General Motors was choosing a site for Saturn, or when foreign carmakers like Toyota, Mercedes-Benz and Hyundai went shopping for plant locations.

Now, there’s a great big prize in the hunt: Tesla’s $5 billion “gigafactory,” which will supply the company with batteries for its luxury electric cars. The enormous 10 million square foot plant is expected to create 6,500 jobs. Tesla CEO Elon Musk says the company plans to invest $2 billion in the factory, accompanied by $3 billion from its suppliers. Tesla’s aim is to become self-sufficient in battery production, allowing its sales to significantly grow without the delays that have plagued other companies.

For perspective, most of the new big car factories in the South began at about 2 million square feet, at least before their expansions, and generally started out with about 2,000 jobs. The sheer size of the Tesla project could assure a state’s economic development reputation.

“This would rank as the most attractive industrial project out there,” Dennis Cuneo, president of DC Strategic Advisors LLC, who was a key player in Toyota’s U.S. expansion, told the Dallas Morning News.

The company says it has narrowed its search for the gigafactory to four states: Arizona, New Mexico, Texas and Nevada. The list doesn’t include California, where Tesla has its production site in Fremont, previously home to the General Motors-Toyota joint venture called New United Motor Manufacturing Inc.

Although these states might not come to mind when you think of manufacturing, they’ve all been aggressive in recent years in landing, or attempting to land manufacturing projects. Here’s how each shape up.

Arizona. The state recently won another big prize: a new Apple factory that’s currently under construction in Mesa, outside Phoenix. The plant, which brings 700 jobs, will make sapphire crystals, like those used on Apple’s iPhone 5S to identify fingerprints. Bloomberg says Arizona officials offered Apple an extensive incentive plan, including a $10 million grant for building improvements, and for hiring and training workers.

Arizona hasn’t wasted any time going after Tesla. The Phoenix Business Journal reported in November that Tesla was looking at the Phoenix area for the battery plant, including old Motorola space in Chandler as well as space in Goodyear and Mesa near Phoenix-Mesa Gateway Airport.

The state legislature is considering tax breaks for energy and equipment costs that could benefit both manufacturers. The decision by Arizona Gov. Jan Brewer on Thursday to veto controversial legislation concerning religious rights is likely to remove a potential cloud over the project.

Texas. The Lone Star State got Apple’s first U.S. manufacturing plant, in Fort Worth, which assembles MacBook Pro laptops. Over the past decade, Texas has led the nation in attracting and creating new jobs. It has a welcoming business climate, with a corporate tax rate between 0.5 and 1.0 percent, and no state income tax. Moreover, Texas prizes its reputation as an automotive state. It was Toyota’s primary choice as the site of a new truck plant a decade ago, and Austin has been building a reputation as a center for advanced automotive research.

The Dallas Morning News predicts there will be a furious bidding war for the factory, and Texas is skilled at preparing incentive packages and plant sites to present to companies. Tesla already knows what it wants. According to the paper, a slide-show on the Tesla website includes a rendering of the facility in a desert landscape, with adjacent solar and wind farms to supply electricity. Construction could begin as early as this year, according to the presentation.

Nevada. If Tesla decides to build near Las Vegas, it would easily be the biggest industrial operation in the city, according to the Las Vegas Review-Journal. But there are a variety of places available around the state. The paper says options could include the 107,000-acre Tahoe Reno Industrial Park in Storey County, about 9 miles east of Reno. It is already home to distribution centers for Wal-Mart, eBay and Toys R Us. A potential Southern Nevada location is the Mountain View Industrial Park in Apex, northwest of Las Vegas Motor Speedway.

The park has about 1,800 acres of flat land available, Lisa Cole, vice president of Land Development Associates, a firm that handles real estate there and in surrounding APEX Industrial Park, told the Review-Journal. Meanwhile, Apple has data operations outside Reno, and its downtown area is eager to land more from the computer maker.

New Mexico. This is the wild card in Tesla’s deliberations. The state has been positioning itself as a center for advanced technology, and officials there say they’ve been working building their case to Tesla “We’ve been working for some time now in a coordinated effort to make the best case for Tesla Motors to come to the Albuquerque metro area,” Gary Oppedahl, Albuquerque economic development director, told KRQE. “We are thrilled to be in the running for a site of this magnitude which has the potential for thousands of jobs with a very forward-looking company. This type of advanced technology is the perfect complement for New Mexico’s strengths.”

No matter which state Tesla chooses, the gigafactory will instantly become a center of global manufacturing, and put the Southwest solidly among regions of the United States with new manufacturing investment.

Tesla Model S

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Source: Forbes Auto

 
 

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