Tesla CEO Elon Musk has mastered the art of getting massive tax breaks and incentives from the state and federal governments for his mega projects. Musk’s comment last month is expected to trigger a fresh bidding war among state governments. He told shareholders in June that Tesla was planning to set up a new manufacturing facility for the upcoming Model Y, which is set to debut in 2019 or 2020. Elon Musk did not reveal how much the Model Y plant would cost, or when and where the factory would come up.
Which state will get the Model Y plant?
The Tesla CEO said last month that the EV maker was “bursting at the seams.” It needed to set up a new facility to build the Model Y SUV crossover. His statement was enough to get the attention of state governments that are ready to offer millions of dollars of incentives to host the Model Y plant. The new facility will have “major manufacturing improvements” that would allow Tesla to build vehicles in ways that a car has never been built before.
According to CNBC, multiple states including California, New Mexico, Texas, Nevada, and Arizona are expected to throw tax incentives and other benefits on Tesla to get the new plant in their state. Greg LeRoy, the director of Good Jobs First, told CNBC that jobs are “very politicized right now.” The states are likely to go the extra mile when a mega-deal comes along.
It’s all about jobs
Tesla never does anything on a small scale. The past negotiations prove that the deal that Tesla would sign with any of these states would be a mega-deal. Back in 2013, Musk triggered a bidding war between Nevada, California, Arizona, New Mexico, and Texas for the $5 billion Gigafactory. The massive battery factory eventually went to Nevada, which offered about $1.4 billion in tax incentives, land, road improvements, as well as massive energy discounts. The battery factory in Buffalo, New York had also received a $750 million incentive package.
The primary reason states want such mega-factories is jobs. Tesla’s Fremont facility that currently produces Model S, Model X, and Model 3, has nearly 10,000 employees. The massive factories also create thousands of indirect employments. According to Tim Bartik of W.E. Upjohn Institute for Employment Research, there will be at least two new jobs created in local supplies and retailers for every job created at the plant.
The Los Angeles Times revealed in 2015 that Elon Musk-controlled companies such as Tesla, SolarCity, and SpaceX had received a total of $4.9 billion in government support. In an interview with CNBC’s Power Lunch, Musk defended his businesses by saying that he was not getting “some huge check.” He argued that the state and federal incentives act as “catalysts” that improve the “rate at which a certain thing happens.”
Tesla developing a new platform for Model Y
It’s too early to say which state is the front-runner for the Model Y plant, but Elon Musk is certainly going to bargain hard for the deal. The Model Y is still a few years away. Musk has already started teasing the vehicle. He has revealed that Model Y will be based on an entirely new platform. Last year, the company had said that it would be based on the Model 3 platform.
The development of a new platform for Model Y hints at a change in Tesla’s plans. It requires a lot of time and resources to develop a new platform. Tesla’s latest move signals that it has started preparing for the next generation of electric vehicles. Musk told investors that the Model Y platform would lead to more automation in the production process.
The Model Y would get rid of the “vestigial” 12-volt battery architecture that we see in other vehicles. Ditching the 12-volt system would reduce the costs and simplify the manufacturing process, said Musk. Tesla has been reducing the wiring in each new vehicle. For instance, the Model S had a 3km wiring harness, which was reduced to 1.5km in Model 3. The upcoming Model Y is said to have only 100 meters of wiring.
The Model Y is expected to cost in the same range as the mass-market Model 3, which has a base price of $35,000. However, the actual price for consumers could go well above $40,000 if they go for optional features and add-ons.
Tesla ramps up service operations ahead of Model 3 debut
Meanwhile, Tesla is gearing up to start Model 3 deliveries later this month. The company has received roughly 400,000 pre-orders for its mass-market vehicle. Elon Musk told media that the company would hold a Model 3 handover event on July 28th. The production vehicle looks slightly different from the pre-alpha design Tesla had shown off to fans last year.
Ahead of the Model 3 debut, Tesla is ramping up its service operations by hiring and training more than 1,000 technicians to meet the expected demand. The EV maker is also adding 100 new service centers around the world, taking the total to 250 service centers. The company is also adding 350 repair vans to its mobile service fleet. Currently, the company has only 30 such vans. The repair vans go to the Tesla vehicle owners’ homes or offices to repair their cars.