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Musk’s Tesla to build battery ‘gigafactory’

Arizona, California, Nevada, New Mexico and Texas pitted against each other.

Tesla Motors Inc. will proceed with building its first battery “gigafactory” in Nevada, said two people familiar with the matter.

The electric-car maker will have representatives at an announcement by Nevada Governor Brian Sandoval on Thursday in Carson City, Tesla spokesman Simon Sproule said in an interview. He wouldn’t say whether Elon Musk, the company’s billionaire co-founder, would attend.

Tesla has pitted Arizona, California, Nevada, New Mexico and Texas against each other in a contest over incentives to lure the $5 billion factory and its 6,500 jobs. Tesla said in August that it had begun 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,” Sproule said.

Musk said in a July 31 conference call that the winning state would be expected to provide about 10 percent of the factory’s anticipated cost. Tax incentives of $500 million would be the largest in Nevada’s history.

“We’ve put what we think works out there,” state Assembly Speaker Marilyn Kirkpatrick, a North Las Vegas Democrat, said by telephone, without disclosing terms. “You have to be able to show a return on your investment.”

Musk has said he intends to break ground at more than one site for the lithium-ion battery factory. Sproule declined to say whether the Palo Alto, California-based company is still considering other 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.

‘Good-paying jobs’

Nevada’s Sandoval, a Republican, will discuss a “major economic development” in a press conference at the state Capitol, according to a statement on the governor’s website. Jennifer Cooper, a spokeswoman for Sandoval’s economic- development office, 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. Kirkpatrick said it would be premature to discuss the idea.

State Senator James Settelmeyer, a Republican whose district includes the Reno-Tahoe Industrial Park where Tesla began initial site preparation, said he didn’t know details of the economic incentives offered to the company.

“I’m for anything that would bring good-paying jobs to my district,” Settelmeyer said in a telephone 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 to reduce lithium-ion cell costs at least 30 percent.

California, which wasn’t on Tesla’s initial list of states for a battery plant, muscled its way 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.

“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.”

©2014 Bloomberg News


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