Tesla Motors Inc (NASDAQ:TSLA) will be able to boost production of its Model S vehicles thanks to a nice tax break from the State of California. That tax break is worth $34.7 million and will be used to purchase new manufacturing equipment, which is worth as $415 million.
Tesla Motors to more than double production
That new equipment purchase is a big win for Tesla Motors Inc (NASDAQ:TSLA) and an indication of the company’s efforts to keep up with significant demand for its Model S sedan. According to SFGate, it will enable Tesla to more than double current production capabilities at its vehicle production facility in Fremont, Calif.
Qualivian Investment Partners Up 30% YTD; Long ORLY Thesis
Qualivian Investment Partners commentary for the second quarter ended July 30, 2020. Q2 2020 hedge fund letters, conferences and more “Short-term investors will accept a 20% gain because they didn’t spend the time to develop the conviction and foresight to see the next 500%.” - Ian Cassell Executive Summary Readers of investment letters fall into Read More
In addition to speeding up Model S production rapidly, Tesla will also be able to build more of the electric powertrains it sells to other automakers, including Toyota Motor Corp (NYSE:TM) (TYO:7203) and Daimler.
Tesla Motors could build 35,000 more cars
Tesla Motors Inc (NASDAQ:TSLA) has been telling investors that it plans to build 21,500 Model S sedans next year. However, after the new equipment installed, the company will be able to add 35,000 more sedans onto that number, bringing the grand total to 56,500 vehicles. It should be noted that at this point, however, Tesla hasn’t raised guidance for the number of vehicles it expects to build in 2014.
The addition of the equipment simply means that it will be possible for the automaker to boost production levels up over 56,000 vehicles in a year. This additional capacity could give bulls more ammo as they build their predictions for Tesla.
Tesla enjoys green tech tax breaks
Although California is one of just a handful of states which taxes purchases of equipment for manufacturing, the state does provide tax breaks for clean technology companies. The aim is to encourage this industry to grow. Those exemptions are granted by the California Alternative Energy and Advanced Transportation Financing Authority.
This isn’t the first time Tesla Motors Inc (NASDAQ:TSLA) has taken advantage of this tax exemption. In the past, the automaker has purchased equipment worth $612 million, receiving a tax break on that purchase as well. The equipment was used to retool the facility in Fremont, which Tesla purchased in 2010 to set up production of the Model S. The same facility will also be used to produce the Model X, which is the automaker’s crossover vehicle.
Also Tesla has been raking in money from the sale of vehicle emissions credits, a revenue stream which is expected to disappear over the next few years.
California benefits too
Tesla will create approximately 112 new permanent jobs. The taxing authority is making the assumption that with these new jobs, the state will see even more income tax revenue and potentially more tax revenue from the sale of more vehicles. Tesla has seen greater demand for its vehicles in California than in any other U.S. state.
These extra taxes are expected to make up for the break the state is giving Tesla. Officials are predicting that California will see a net benefit of $24.4 million from the exemption.
Shares of Tesla Motors Inc (NASDAQ:TSLA) rose more than 3% during the regular trading day on Tuesday.