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Wednesday, September 17, 2014
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Published: Wednesday, 9/3/2014

Tesla said to select Nevada for first battery 'gigafactory'

2014 BLOOMBERG NEWS

Tesla Motors Inc., which has broken ground on a potential site in Nevada for its planned massive battery factory, will proceed with building the first such facility there, said two people familiar with the matter.

Representatives from the electric-car maker led by billionaire entrepreneur Elon Musk are to attend an event with Nevada Governor Brian Sandoval set for 4 p.m. local time tomorrow in Carson City, Tesla spokesman Simon Sproule said in a phone interview. He declined to confirm whether Musk would attend or elaborate on what will be announced. Tesla said in August that it began preparation work at a site near Reno.

“We continue to work with the state of Nevada, and look forward to joining the governor and the legislature tomorrow,” Sproule said. Musk has said his intention is to break ground at more than one site for the lithium-ion battery factory. Sproule declined to say whether other states are still being considered.

With plans to invest as much as $5 billion in the facility and the possibility of 6,500 direct jobs, the Tesla factory ranks as one of the largest new U.S. industrial projects. The Palo Alto, California-based company had also named Arizona, California, New Mexico and Texas as potential sites, triggering an incentive fight among the Southwestern states.

Musk has set a goal for Tesla to eventually sell at least 500,000 electric cars a year and supply stationary battery packs to store power from solar panels for homes and businesses. The company will eventually need more than one Gigafactory, Musk told Bloomberg in April.

The Nevada project won’t be the last such factory for Tesla, said one of the people, who asked not to be named because the matter isn’t yet public.

 

‘Earliest Responder’

“It may be that Nevada isn’t the sole winner, but is the earliest responder to Musk’s needs for this project,” said Karl Brauer, senior industry analyst for Kelley Blue Book in Irvine, California. Given the scope of Tesla’s ambitions, the company may move beyond supplying batteries just for cars and power storage systems, he said.

Musk “wants to corner the battery market, or at least have a huge level of investment or influence in it, so that he can essentially set his own costs and prices,” Brauer said.

Panasonic Corp., Tesla’s main supplier of lithium-ion cells, said in July that it plans to participate in the battery plant, without saying how much it will invest in the project.

Tesla fell 1 percent to $281.19 at the close in New York. The shares have risen 87 percent this year.

 

‘Good-Paying Jobs’

Nevada’s Sandoval, a Republican, will discuss a “major economic development” in a press conference tomorrow at the state Capitol, the governor’s website said in a statement. Jennifer Cooper, a spokeswoman for Sandoval, declined to elaborate on what he’ll say.

Sandoval wants state legislators to schedule a special session to approve incentives for the Tesla factory, according to a report by KSNV, a Las Vegas television station.

State Senator James Settelmeyer, a Republican whose district includes the Reno-Tahoe Industrial Park where Tesla began initial site preparation work, said he doesn’t yet know details of economic incentives the state is offering the company.

“I’m for anything that would bring good-paying jobs to my district,” Settelmeyer said in a phone interview. “I’d do that for any company.”

For Nevada, with a 7.7 percent unemployment rate that ties with Michigan and Rhode Island for third-highest in the U.S., Tesla represents an opportunity to show that its economy can diversify beyond gambling and housing.

 

California ‘Devastated’

Musk has said he wants the factory as part of his plan to accelerate production of Tesla’s electric cars to hundreds of thousands of units annually. The scale of the plant, which will fabricate battery packs from raw materials shipped to the facility, is intended to reduce lithium-ion cell costs at least 30 percent, according to Musk.

California, which wasn’t on Tesla’s initial list of states for a battery plant, muscled itself into competition by proposing incentives including expedited environmental review. The state legislature adjourned last week without agreeing on an incentive package.

State Senator Ted Gaines, a Roseville Republican whose district includes one of the sites the company reviewed, issued a statement as lawmakers adjourned expressing disappointment and suggested that Tesla was at least partially to blame.

“I’m devastated for the 6,500 families who won’t have the chance at these jobs unless they move to Nevada,” Gaines said in an e-mailed statement today.

“Tesla is a California-born company that the state has invested heavily in and we want it to succeed,” he said. “It makes complete sense for it to expand right here, close to its headquarters, yet they are headed out of state.”



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