August 19, 2014 at 3:41 pm

Competition heats up for Tesla's gigafactory

Palo Alto, Calif.— Tesla Motors’ plan to build a massive battery manufacturing plant — its “gigafactory” — has set off fierce competition for the country’s biggest economic development prize in years. As the five states under consideration intensify efforts to land the factory and its 6,500 jobs, speculation about who holds the lead is rampant and changes by the day.

Tesla acknowledged last month it already has broken ground on a “potential” site in Reno, Nev., where crews have excavated earth for construction. But while Tesla has paid for the work in Reno, the company says it continues to evaluate sites in Arizona, California, New Mexico and Texas.

“The wild card in this sweepstakes are the incentive packages being crafted behind closed doors,” said John Boyd of The Boyd Co., a New Jersey-based site-selection firm. “I think Reno is the front-runner, but Texas is very much in the hunt, and I’d put California third. But at this point, groundbreaking has not taken place in any of the other strong candidate sites like Tucson, San Antonio or Dallas.”

For the competing states, the plant is enticing because manufacturing jobs tend to have better wages and benefits than service sector jobs, such as retail and restaurants. For Tesla, the giant plant is key to reducing battery costs for its upcoming Gen 3 electric vehicle, which it hopes to sell for roughly $35,000. It wants a 500- to 1,000-acre site to accommodate up to 10 million square feet of construction.

In California, efforts to land the plant are led by Mike Rossi, Gov. Jerry Brown’s senior adviser for jobs and business development, although the governor said he’s spoken to Tesla chief executive Elon Musk once on the phone. California, originally not on the list of states being considered, has been viewed as an underdog due to its high taxes and stringent environmental laws. Rossi declined to comment for this story.

State senators Ted Gaines and Darrell Steinberg have co-authored a Tesla incentive bill, but details on what it would offer are not final. Tesla has not commented on any specific sites. Lawmakers have until Aug. 28 to get any incentive package passed.

“At one point Tesla was looking at 31 sites statewide,” Gaines, who recently showed up at Tesla’s Palo Alto headquarters with a symbolic golden shovel, said in an interview. “I’d love to see it in the Sacramento area.”

Texas Gov. Rick Perry has earned a reputation as an economic wunderkind for attracting businesses to the Lone Star State through the Texas Enterprise Fund, which was created by the Legislature at his request more than a decade ago and has become the largest “deal-closing” fund in the nation. Texas offered $2.3 million to help bring SpaceX’s commercial rocket launch facility to the Brownsville area; SpaceX is also run by Musk.

But Perry is also a skeptic about whether climate change is man-made, and Texas currently bans direct auto sales. Those could be big negatives for Tesla, which is on a mission to reduce carbon emissions and sells its electric cars directly to consumers rather than through dealerships.

As it evaluates various sites, Tesla has stressed that speed is of the essence.

“The sooner this can be done, the sooner we can reduce carbon output and reduce the probability of a catastrophe,” Musk said at Tesla’s most recent earnings call with analysts. “And in the absence of gigafactory, this progress will be much slower.”

Tesla has said the final site for the first plant — it may build more than one — will be decided within months. It also has said the winning state should be prepared to cover roughly 10 percent of the $4 billion to $5 billion cost.