Tesla: $500 Million in Cash For The Gigafactory?

We reported previously that a site near Reno, Nevada would host the Tesla Motors $5 billion dollar “Gigafactory.” Their victory meant beating out other states vying for that opportunity. Texas, California, New Mexico and Arizona also worked very hard to get the electric car company to move to their state. In the end, of course, Nevada came out victorious. They will host a factory that will provide them with 6,500 jobs. However, what was the road like to reach that point? It’s understood that Nevada won partially due to geography, however the deal was nearly all about cash.

Fortune magazine recently dug deep into the negotiations between Tesla Motors, primarily Elon Musk and those legislators in the states, which wanted to host the Gigafactory. Primarily, the article mentions how Tesla reportedly jumped all over the place in their negotiations. Two of the finalists, Texas and Nevada both had ups and downs in their talks with Tesla. Texas had multiple sites that they sought to make available to Tesla, including San Antonio and Hutto. The deal with the Silver State almost fell through. Tesla was reportedly working on a deal with Nevada in terms of timely tax breaks and free land. Seemingly out of nowhere, Tesla asked to be given $500 million cash instead of subsidies. This wasn’t going to be possible in Nevada, a state with a $6.5 billion dollar state budget. Nevada said no. What occurred next was Tesla shopping the $500 million dollar proposal to other states, including Texas. Texas however, also refused. More confusion ensued when Musk publically said that his company was breaking ground on “something similar in one to two other states.” This led to a lot of confusion. Tesla, however, eventually came around. Nevada won the Gigafactory and Tesla found their site. It cost Nevada 20 years without sales tax on construction and materials ($725.8 million), 10 years without property taxes ($349 million), 10 years without payroll taxes ($29.4 million) and another $8 million in electricity discounts. Nevada got its plant, for just over a billion in incentives.

What do you think of Elon Musk’s negotiation strategy? The Gigafactory is seen as a large risk for Tesla. The factory has to churn out the right amount of batteries to lower the price of Tesla vehicles. Is Tesla’s Gigafactory gamble going to pay off? Will Tesla ever sell their vehicles using dealerships?