Nevada taxpayers will be shouldering quite a burden in securing Tesla Motors Inc (NASDAQ:TSLA)’s massive gigafactory. The automaker wants to see up to $3 billion in tax breaks to pay for approximately half of the cost of the facility. Tesla said in regulatory filings that it will build the factory just outside Reno, Nev.
Tesla discloses gigafactory location
In the most recent regulatory filing, Tesla Motors said it plans to spend between $4 billion and $5 billion in capital expenditures on the gigafactory in the next six years. The filing added that about $2 billion will come from Tesla. Fox Business reports that Tesla may see closer to $600 million in tax breaks each year despite media reports that the automaker will receive only about $400 million in breaks each year.
Nevada beat out Arizona, California, New Mexico and Texas in the competition to attract the factory, which is expected to create about 6,500 new jobs and stimulate growth in the state’s economy. Lawmakers in Nevada are taking a big risk in assuming that the tax breaks they’re giving will be offset by the economic growth the facility will spur.
Tesla burns cash
Tesla Motors is in need of such deep tax breaks because it is busily burning through the cash it has on hand. The gigafactory is expected to begin production in 2017 but not be fully operational until 2020. The automaker currently has $2.6 billion in cash but $4 billion in liabilities.
The company also said that its overhead expenses are increasing by 20% annually. Tesla will see capital expenditures continue to rise as it opens more factories and Supercharger stations around the world.
Tesla supported by taxpayers
So far, the automaker has been largely sustaining itself through tax breaks like the one it negotiated from the state of Nevada. Tesla has been supported by hundreds of millions of dollars from taxpayers throughout its time as a public company. CEO Elon Musk’s other companies, SolarCity Corp (NASDAQ:SCTY) and SpaceX, have also relied heavily on taxpayer money.
In addition to taxpayer money, Tesla also takes advantage of government subsidies and credits, like the zero-emission vehicle credits, which the automaker has turned a tidy profit by selling to makers of traditional gas powered vehicles.