Tesla Motors Inc Sees $3B In Tax Breaks For Gigafactory

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Tesla Motors Inc Sees $3B In Tax Breaks For Gigafactory
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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.

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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.

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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.

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Michelle Jones is editor-in-chief for ValueWalk.com and has been with the site since 2012. Previously, she was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Email her at Mjones@valuewalk.com.
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8 COMMENTS

  1. Just about every expanding large manufacturing company would expect local tax breaks like this and they would get them. Boeing comes to mind off the top of my head. This deal is no different.

  2. Yeah I agree. Just look at GM and the other american automakers. They’re doing it right. They make quality cars evidenced by low recalls, and receive no subsidies or bail outs. What good is solar charging and electricity to the environment. Tesla should be ashamed.

  3. 3 billion in tax breaks but a profit over 20 years of up to 40 billion for the state…

    Right, the state is getting so ripped off…

  4. The tax breaks are a bad deal for Nevada. Hopefully, the taxpayers will revolt and throw the bums out of office if they ink this rotten deal!!!

    Tesla can’t survive without Federal Government subsidies and local property tax breaks. Their business model is NOT sustainable and should be allowed to sink or swim on it’s own merits. End of story!

  5. “So far, the automaker has been largely sustaining itself through tax breaks…”, and not by outselling the Mercedes s-class, audi A8, bmw 7 series or the lexus ls460? Does Valuewalk have ANY editors or is it basically just another Seeking Alpha?

  6. Go preach to the choir. GM has 21 Million cash and 131 Million in liabilities. Approximately 16% cash to liabilities. Tesla beats that by over double at 60% which is 4x higher, assuming you didn’t pull your numbers out of your ear. This is a meaningless metric. But I don’t mind, because someday soon, although I hope not too soon, you cover your short bet at a tremendous loss and send a few retirement dollars my way.

    Source you ask? duh. https://finance.yahoo.com/q/bs?s=GM

  7. Wholly crap do I feel sorry for you! What crawled up your
    attitude and died. Did you have a strong short position against Tesla that has not been working out so well? That would explain one of your other articles where you basically quoted a negative article (A Shorter) from someone on seeking alpha. I’m sorry you have not gotten what you had hoped for, but trying to rip apart a man and his company which are truly trying to make this world better place is just messed up!

    We do not even need to get into the details here. In the long run what Tesla will bring to this state and world will defiantly out weight the current costs. Which I highly doubt you are correct on. Do some research on Elon. Which it is obviously you haven’t. Watch him speak and then tell me you have your same negative attitude towards him.

    People like you make me truly sad… Truly…

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