It was supposed to be a $5 billion project, creating 6,500 jobs. That was the hype when Tesla Motors last summer orchestrated a five-state battle to host a huge “gigafactory” where it plans to build batteries for its next generation of electric cars.
Anyone who has driven one knows the Tesla Model S seems to take off like a bullet from a standing start, pushing driver and passengers back into their seats with strong G-forces.
The only bullet involved with the luxury electric car company’s battery plant – to be built in association with Japan’s Panasonic Corp. – is the one California dodged by losing the plant to a location near Reno.
Dodging a What?
For construction of this plant is not exactly moving like a speeding bullet. Rather, it is plodding along.
Meanwhile, Nevada has already okayed spending at least $70 million on roads to service the plant, not to mention an unknown amount in property taxes lost to the exemption given the plant as one incentive to build there. Iron workers had erected $15 million worth of steel framing on the site by early winter. Then came an apparent slowdown.
An early March Reno newspaper report quoted a post on the national union job board of the International Brotherhood of Electrical Workers saying “Project Tiger” – the Tesla plant’s code name – “has been cut back by 80 percent at this time. This is all subject to change.” In short, Tesla is hiring far fewer electricians than previously planned.
This could be because of reported problems finding and/or keeping competent project managers on the job — or not.
The development came almost simultaneously with the company downsizing its China production facility, cutting 180 of 600 employees there, or 30 percent of its workforce.
Was there a link? Possibly not, but Tesla wasn’t saying, insisting both that the Nevada plant is right on schedule and that there’s nothing to worry about in China. But if Tesla’s sales of its high-end Model S – which can cost $120,000 – have slowed, might that affect the pace for rolling out its promised mid-price, mid-size car, due to get its batteries from the Nevada plant?
Slow Motion
Company kingpin Elon Musk isn’t saying. The firm sold only 120 cars in China in January, behind its projected pace and one reason Tesla stock has traded lately at more than $40 below its 2014 peak.
Mr. Musk maintains this was because many urban Chinese don’t have access to garages, where American Tesla owners most frequently recharge their cars.
He insists this is a temporary glitch. Tesla is fast building a large chain of recharging stations across much of China, with nearly 700 slots now open in 70 cities.
This all appears to mean great uncertainty for Tesla, and for the state of Nevada, which eventually will pony up $1.3 billion under promises made when it landed the battery plant. No one knows the pace with which the plant will be built. No one knows if it will produce the thousands of expected jobs, for which Nevada will pay well over $100,000 each if all 6,500 materialize – more for each if the plant hires fewer workers.
Nevada never has paid anything like that to casinos or other big employers. Nor has California ever paid so much in corporate welfare. Plus Tesla will pay no local property taxes for years to come. No one knows who will build schools and hire teachers for children of the putative new workers.
That’s what California “lost” when it didn’t get the opportunity to subsidize Tesla’s battery plant, which could have been sited near Stockton. Just now, it looks like this state dodged a significant bullet.
A larger question is whether any government should make corporate handouts on so grand a scale. Whenever American companies encounter similar government subsidies to their foreign rivals, they gripe about unfair competition.
And yet…Toyota, Nissan, Volkswagen and Mercedes Benz all have gotten similar packages from states like Texas, Tennessee, Alabama and Mississippi.
The ultimate outcome of the Tesla deal is not yet known, but right now it looks like California will be far better off by losing the battery plant than if it had won the competition.
Mr. Elias may be contacted at tdelias@aol.com. His book, “The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It,” is now available in a soft cover fourth edition. For more Elias columns, go to www.californiafocus.net