Tesla Motors Inc Gigafactory: Don’t Give Away The Farm, Say Watchdogs

Tesla stockBlomst / Pixabay

Tesla Motors Inc. (NASDAQ:TSLA)’s gigafactory has become a challenge for the five states that are ferociously competing with one another to get the facility in their states. However, for the first time, budget authorities in these five states, namely, Arizona, California, Nevada, New Mexico and Texas, have jointly written an open letter to the states to keep them from giving too much in tax breaks and incentives to woo corporations, says a report from Mercury News.

Budget Watchdogs question incentives

Chris Hoene, executive director of the California Budget Project, said during an interview on Tuesday, “This process is so crazy. Tesla is in the driver’s seat on this, and five governors are falling over themselves.” Hoene said that the gigafactory is a big opportunity, but the prices states are agreeing to pay are pretty huge.

Good Jobs First, a Washington, D.C.-based organization, presented the letter first. It was signed by the watchdogs of the five states that are under consideration for the gigafactory. The California Budget Project, the Progressive Leadership Alliance of Nevada, Texans for Public Justice and others were also involved. Good Jobs First is a leading monitor and critic of company-specific subsidy deals.

The states wrote in the letter that they are competing against each other for the factory, but no real winner may emerge. The price set at $500 million in subsidies by Tesla for setting up its gigafactory is unusual, according to these budget authorities.

Tesla asks big subsidies

The EV manufacturer has already initiated work in the probable gigafactory site in Reno, Nev., where workers have started preparing the site for construction. However, Tesla maintains that it is also evaluating other sites in Arizona, California, New Mexico and Texas. In a bid to get the $5 billion plant and 6,500 jobs, every state in the running is designing incentive packages surreptitiously.

Manufacturing jobs offer better pay and benefits packages to the workforce compared to service sector jobs such as restaurant positions. This is why the gigafactory is a tempting offer for the states. Tesla is interested in setting up the gigafactory because it is the key to reducing battery prices for its low-price vehicle, which will be priced around $35,000.  For the massive factory, a 500- to 1,000-acre site is required to start construction on the the 10 million square feet facility. However, the Elon Musk-led company wants the states to bear 10% of its $5 billion cost.

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com

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