Place Your Bets: Tesla Announces Four Possible States for a Factory
This week, Tesla announced that it had plans to build a $5 billion, 500 to 1,000 acre, state of the art "Gigafactory" in one of four possible states, that could account for as many as 6,500 jobs. Tesla estimates that in just six years, it could be building 500,000 cars a year. So which of these four states makes the most sense? The Basics The four states in contention for the new plant are Texas, Nevada, Arizona and New Mexico. The plant in question would be built solely to provide batteries to Tesla's Fremont, California, facility. No cars will be produced. Part of the financing for the $5 billion plant would come from $1.6 billion in convertible senior notes in a public offering.
The obvious commonalities here are that each of these states is warm, dry, and loaded with options for non-union labor. Here's where they differ:
The Lone Star State has a lot going for it in terms of economic development. It has no personal income tax, has a 12.9 million-man labor force, has 52 Fortune 500 companies within its borders, and is America's #1 exporting state.
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The downside for Texas is almost all of that economic development and skilled labor is anathema to Tesla. It's in Oil and Gas.
Of the four states considered, Nevada is the only one that's in the top 10 states for taxes on business, right behind Wyoming and South Dakota, according to the Tax Foundation’s State Business Tax Climate Index released last October. Forbes also ranked it #5 in business costs, and #11 for growth prospects.
Yet Nevada fared dismally in Forbes' overall study, at 36th in the Union. That's 23 spots behind notoriously business-unfriendly Massachusetts. Why? Labor and economic climate, for which it scored at the bottom of the barrel. Nevada in in short supply of a skilled labor force. But we're talking batteries, not cars, so maybe that's a plus.
Arizona fares a lot better in Forbes' rankings than Nevada did, at 24th in the nation. It ranked number 1 in terms of growth potential, coming out of the hammering it took during the economic downturn. It as a significantly better labor supply than Nevada, and its population growth is headed in a positive direction.
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The risk here? What was all over the news last week. Arizona -- led by Governor Jan Brewer -- seems to engage in stunt politics more frequently than any other state. When it's not pulling people over in traffic for the crime of being brown, it's floating bills that allow business owners to not serve homosexuals. Building a factory in Arizona might not mesh with the progressive politics of the average Tesla buyer.
New Mexico ranked 45th out of 50 states in Forbes' annual ranking, experiencing a business rating freefall that's gone on for three straight years now. The state scores low in terms of business costs, labor supply, economic climate and regulatory environment, and at the very bottom of all 50 states for Quality of Life, based on education, crime and poverty rates.
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What it does have going for it, though, is the fact that the federal government has an awful lot of smart people working there. Two of the largest employers in the state are Los Alamos National Laboratory and Sandia National Laboratories, peopled with the kind of whiz kid geniuses a guy like Elon Musk would love to work with.
This is no small move: If Tesla does build a factory, overnight, it will be producing more than twice the total worldwide production of lithium ion batteries today, right here in the United States. And if you've been watching so far, betting against Elon Musk is pretty risky.