Which State Will Dish Out $500 Million For Tesla’s Gigafactory?

Five states are competing for the chance to host the Tesla Motors “Gigafactory.” The proposed 5-billion dollar site will either be built in California, New Mexico, Nevada, Arizona or Texas. The competition is reportedly fierce, with each state offering subsidies that are apparently very appealing. The specifics of those subsidies are not currently public information. The would-be “Gigafactory states are attracted to the economic possibilities that the Tesla site could bring.

During this time of economic uncertainty across the nation these five states want jobs, something the “Gigafactory” will certainly provide. An estimated 6,500 jobs will be created in whichever state lands the factory. The question is, who needs it the most?

According to July 2014 figures, this is how the five states stack up in the latest unemployment numbers:

-Texas 5.1%

-New Mexico 6.6%

-Arizona 7.0%

-California 7.4%

-Nevada 7.7%

Clearly, Nevada is hurting the most for jobs, while corporate-friendly Texas is faring much better than any of the other four states. Those jobs are needed by those desperately seeking work and wanted by politicians wanting to hang their hat on attracting thousands of living wage jobs to their state. What then will those politicians do to get the coveted factory to their state? In this case, give Tesla Motors $500 million in incentives. According to Tesla founder Elon Musk, the half billion incentive cost for the gigafactory is par for the corporate course. “It’s the responsibility of management to look for the best financial arrangements for the company,” Musk said. “ I really would describe it as business as normal.”

Is it business as normal? To find out what normal is in this case, it’s important to gain perspective. This is not the first time that at state has paid hundreds of millions in subsidies in order to attract an automaker.

As reported in the Automotive News back in 2008, Tennessee dished out an incentive plan worth around $580 million to Volkswagen for construction of a Chattanooga Assembly Plant. Alabama reportedly offered Volkswagen $385 million for the same plant. Mississippi offered Toyota $294 million for their Blue Springs plant. Tennessee also provided Nissan with $197 million in incentives for moving their North American headquarters from California to Tennessee.

Clearly, the business of states bidding on factories using the currency of incentives isn’t anything new. However it’s worth nothing that every time that a state gives incentives to lure a business, it sets a precedent. What will all of this bidding and incentives mean for the future of companies like Tesla? Can states be both bidding on the construction of a new Tesla “Gigafactory” and trying to prevent their direct-to-consumer sales model though legislation? Two of them are doing that right now. Arizona and Texas currently outlaw Tesla sales from a Tesla Gallery store.